FBD had deal in place before Fairfax

FBD was close to striking an alternative bond transaction, with an undisclosed backer, before it opted for better terms under the €70m fundraising deal with Canada’s Fairfax Financial Holdings, the Irish Examiner understands.

Shareholders yesterday voted to approve the Fairfax convertible bond deal at Bluebell in west Dublin, which FBD first unveiled earlier this year.

Over 90% of the troubled insurance group’s shareholders voted to approve the investment from Fairfax.

That investment, one of FBD’s emergency measures to boost its cash reserves, will see Fairfax invest via a 10-year bond, with an annual coupon of 7% and a conversion rate of €8.50.

This means if FBD’s share price reaches and stays at or above that level for 180 consecutive trading days then Fairfax will have its interest converted into a stake of about 19%.

The group’s share price was up slightly yesterday at €6.80.

FBD’s chief executive Fiona Muldoon told shareholders yesterday the group had examined all viable options regarding the €70m fundraise.

The group has already raised €48.5m via the sale of its 50% share in its hotels and leisure business.

She said that, before the offer of better terms from Fairfax, a bond agreement, with a separate lender had tentatively been agreed, with a coupon of 12% attached.

Ms Muldoon said that while a rights issue had also been considered, the Fairfax deal was the best option.

She said the group is on course to deliver its planned €7m in cost savings by the end of March.

While FBD is in a closed period, Ms Muldoon reiterated her recent stance that management remains confident of returning the business to operating profitability by the fourth quarter of next year.

FBD recorded a pre-tax loss of €96m for the first half of this year, in August.

While no decision on office/branch closures will be taken until the new year, she also stressed the importance of FBD’s branch network to the group’s business.

It is thought about 100 staff members have signed up for voluntary redundancy.

Earlier this year, Ms Muldoon admitted it will be difficult to return the business to full-year profitability in the short-term.