Insurer WR Berkley to Sell Baby Bonds

WR Berkley (WRB) has announced an offering of baby bonds.

The bonds will have a maturity in 2059 with an early call period starting in 2024.

WRB has a number of other baby bonds outstanding–1 of which carries a 5.625% coupon and is now callable (WRB-B)--it can be seen here.

The company has not announced a call on the above issue–the ‘use of proceeds’ statement on the new issue says ‘to be used for general corporate purposes’, but I believe they will call the WRB-B issue for 1/31/2020.

Disclosure–I hold the WRB-B issue. It is trading at $25.28 –right about where it should be with accrued interest (assuming about a 30 day notice). If I am right on predicted call date it has 7 cents worth of potential ;eft.

The preliminary prospectus can be read here.

EarlyBird is the ‘early bird’ on this issue.

18 thoughts on “Insurer WR Berkley to Sell Baby Bonds”

  1. Issuer Free Writing Prospectus
    Filed Pursuant to Rule 433
    Relating to Preliminary Prospectus Supplement dated
    December 9, 2019 to Prospectus dated November 14, 2017
    Registration Statement No. 333-221559
    December 9, 2019

    W. R. Berkley Corporation
    $300,000,000
    5.10% SUBORDINATED DEBENTURES DUE 2059

    Issuer: W. R. Berkley Corporation

    Securities: 5.10% Subordinated Debentures due 2059

    Security Type: Subordinated Debentures

    Anticipated Ratings*: Moody’s: Baa2 (stable) / S&P: BBB- (stable)

    Minimum Denominations: $25 and integral multiples of $25 in excess thereof

    Trade Date: December 9, 2019

    Settlement Date (T+5): December 16, 2019

    Maturity Date: December 30, 2059

    Underwriting Discount: $0.7875 per debenture sold to retail investors and $0.50 per debenture sold to institutional investors

    Principal Amount: $300,000,000

    Proceeds (after underwriting discount and before expenses): $291,378,287.50

    Price to Public: $25.00 plus accrued interest, if any, from December 16, 2019 to the date of delivery.

    Coupon: 5.10%

    Interest Payment Dates: Quarterly on the 30th of each March, June, September and December, commencing on March 30, 2020.

    Record Dates: Interest payments on the debentures will be made to the holders of record at the close of business on March 15, June 15, September 15 or December 15, as the case may be, immediately preceding such March 30, June 30, September 30 or December 30, whether or not a business day.

    Optional Interest Deferral: The Issuer has the right on one or more occasions to defer the payment of interest on the debentures for up to five consecutive years (each such period, an “optional deferral period”). During an optional deferral period, interest will continue to accrue at the interest rate on the debentures, compounded quarterly as of each interest payment date to the extent permitted by applicable law.

    Optional Redemption: The Issuer may elect to redeem the debentures:

    •   in whole at any time or in part from time to time on or after December 30, 2024, at a redemption price equal to their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption; provided that if the debentures are not redeemed in whole, at least $25 million aggregate principal amount of the debentures must remain outstanding after giving effect to such redemption;

    •   in whole, but not in part, at any time prior to December 30, 2024, within 90 days of the occurrence of a “tax event” at a redemption price equal to their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption; or

    •   in whole, but not in part, at any time prior to December 30, 2024, within 90 days of the occurrence of a “rating agency event” at a redemption price equal to 102% of their principal amount plus any accrued and unpaid interest to, but excluding, the date of redemption.

    Use of Proceeds: The Issuer intends to use the net proceeds from this offering for general corporate purposes.

    CUSIP; ISIN: 084423 805; US0844238057

    Joint Book-Running Managers: Morgan Stanley & Co. LLC
    BofA Securities, Inc.
    UBS Securities LLC
    Wells Fargo Securities, LLC

    * Note: A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. Each credit rating should be evaluated independently of any other credit rating.
    The Issuer has filed a registration statement, including a prospectus, with the Securities and Exchange Commission for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the Issuer has filed with the Securities and Exchange Commission for more complete information about the Issuer and this offering. You may get these documents for free by visiting EDGAR on the Securities and Exchange Commission’s website at http://www.sec.gov. Alternatively, the joint book-running managers will arrange to send you the prospectus if you request it by calling or emailing Morgan Stanley & Co. LLC, toll-free at 1-866-718-1649 or prospectus@morganstanley.com, BofA Securities, Inc., toll-free at 1-800-294-1322 or dg.prospectus_requests@baml.com, UBS Securities LLC toll-free at 1-888-827-7275, or Wells Fargo Securities, LLC toll-free at 1-800-645-3751 or wfscustomerservice@wellsfargo.com.

  2. I just got a call from the FI desk at TDA (I’m on their alert list). While she was describing the issue, it sold out. She said 5.10% paying quarterly.

    1. Martin G–don’t see any panics–but it is a darned good one to hold being tied to $25.

  3. It would seem to me that if there was an expectation of calling WRB-B on the basis of this new issue there’d be more of a hint of that possibility within the Use of Proceeds to the point of including possible call of other outstanding debt as one area of consideration under “general corporate purposes.” That seems to be the boilerplate language these days when companies are considering calling among other potential uses from new proceeds…. Additionally, WRB-B is callable on 30 days notice, so there’s no particular reason why any potential call would coincide with the next coupon date.

    1. I agree … and would add that if the estimated size of the new issue is correct at $100million, it’s not big enough to call the entirety of the WRB-B issue at $340 million.

    1. Thank you for the insight. Much appreciated. I’m not so sure they’re calling 5 5/8 to issue at 5 1/8. That’s a six year payback period assuming 3% underwriting discount.

      1. Hope you’re right–doesn’t matter too much since the pricing on the B issue is just right.

        1. I took a leap of faith – well, perhaps not a leap, maybe more like a hop – and bought 200 shares of WRB-B @ $25.27.

          The worst possible outcome would be a call in January, and I gain about 6 cents/share after the dividend.

          If they don’t call, I am well set up for the next dividend, and can then ride the gravy train until called.

  4. What rate do you think they’re issuing at for it to make sense to call a 5.625%? Seems like they’d need to issue at 4.75 or lower for the call to make sense. If so, that would be a pretty low coupon for BBB- baby bonds.

    1. I agree. It doesn’t make sense for a 0.5% improvement given the 3+% underwriting fee and other issuing and redeeming costs. Lets hope they don’t call as there are fewer pinned-to-par preferreds out there these days to hold.

      1. I’m sitting on 2000 shares of prB so you know how I feel about this. I guess I should construct a short list of replacements “just in case”.

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