Allstate Retires $3 Billion in Debt
Last week, the Allstate insurance company announced that it will retire $3 billion of its debt, primarily through the use of new securities. This is expected to charge up the second quarter of 2013, providing an opportunity for better profit margins in the coming months.
“The net result will be more equity in the capital structure, lower capital cost and a longer maturity profile, with no meaningful impact on ongoing earnings,” said Allstate’s CEO Thomas Wilson.
The company plans to repay or prefund $1.2 billion in maturing debt for 2013 and 2014. It also plans to repurchase parts of its $4.3 billion outstanding debt at a premium.
Much of the funding from the relief will come from cash balances, senior debt, hybrid debt and the issuance of perpetual preferred stock. In spite of this, there will be no changes in Allstate’s existing repurchase programs.
The massive tornado that hit Moore, Oklahoma last week may put a slight damper on plans, with damage estimates reaching up to $5 billion. This will lead to a variety of new claims for Allstate, which could tie up funds. Nevertheless, Allstate has every intention of retiring $3 billion of its debt in 2013, all while helping with this and any other natural disasters that come along.