WARREN, N.J., Nov 26 (Reuters) - U.S. business insurer Chubb Corp. said it raised $525 million by selling securities automatically convertible into company stock.
The company, based in Warren, New Jersey, announced the sale of its "mandatory" convertible securities, which convert into company stock in three years, late Monday. It said it intends to use proceeds for general corporate purposes, including capital contributions to its units.
Chubb said it sold 21 million equity units, consisting of debt and common stock purchase warrants, at $25 per unit. The securities carried a 7 percent coupon and are convertible into Chubb shares at $69.10, a 22 percent premium over Chubb's $56.64 closing share price on Monday.
A 7.25 percent to 7.75 percent dividend and 18 to 22 percent premium were originally expected. The final terms suggest strong investor demand. Chubb said it may sell an additional 3 million units, or $75 million, to meet demand.
Last month, Chubb posted a third quarter net loss of $242.1 million, or $1.42 per share, as it boosted reserves for asbestos-related claims by $625 million. It said rising prices will boost fourth quarter earnings.
On Nov. 3 it tapped John Finnegan, president of General Motors Corp.'s finance arm, as its new chief executive, ending a six-month search.
Standard & Poor's Ratings Services rated the convertible securities "A-plus," its fifth highest grade. It said Chubb "maintains a very strong and diversified portfolio of property/casualty businesses through its operating subsidiaries, as well as a strong balance sheet."
Moody's Investors Service on Nov. 21 cut Chubb's senior unsecured debt rating to "A1," equal to S&P's rating.
Convertible securities are stock-bond hybrids that usually offers current income and can be converted into company stock.
Goldman Sachs & Co. and Salomon Smith Barney arranged the sale.