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amp bid to settle market nerves

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    Referenced from "The Courier Mail"

    AMP bid to settle market nerves
    John McCarthy, investment editor
    AMP shareholders may be asked to approve a dilution of their equity in the company.

    This comes after the embattled insurer confirmed that it was likely to restructure its reset preference shares in the run-up to its looming demerger.

    Part of the turmoil in AMP's share price last week has been blamed on rumours the company would have to either buy out the preference shares at face value or convert them into ordinary shares, which would form part of a capital raising.

    The shares were issued last year to raise more than $1 billion to help bolster the group's balance sheet after the full extent of its woes in the UK became apparent. AMP did not spell out its plans for the prefs yesterday but did say that any strategy would be part of a shareholder-approved demerger of its Australian and UK businesses.

    AMP also tried to settle the market's nerves by reconfirming its earnings forecasts for the June 30 half year, which sent its shares 6¢ higher to $4.52.

    The company also said that its Australian financial services business was "more than holding its own" with net inflows for the June 30 year of $751 million.

    Chief executive Andrew Mohl said AMP was concerned about the impact of speculation surrounding its profit which would be reported on August 20.

    "The uncertainty is understandable given the complexity of the proposed demerger and the continuing uncertainty about the state of the UK life and pensions industry," Mr Mohl said. "While we are working through many of the issues associated with the demerger, AMP is anxious to ensure that shareholders understand the company's current position.

    "AMP management can confirm that preliminary results for the business unit operation margins, underlying group earnings and UK writedowns are broadly in line with the guidance given on May 1."

    AMP also said progress had been made on the strategic plans for its demerger and the creation of an Australian-based AMP and a UK-based Henderson.

    Full details of the proposal would go to shareholders in an explanatory memorandum by mid-October after being approved by the Australian Securities and Investments Commission.

    It also appointed Rothschild to give an independent expert's opinion on the strategy. Cazenove and UBS have been asked to investigate the option of an early listing on the London Stock Exchange for the new Henderson business.

    Mr Mohl said the company was particularly concerned about the persistent market speculation about the post-merger structure of the new, Australian-based AMP and the reset preference shares.

    "The final capital structure of both new entities is yet to be resolved and remains subject to ongoing discussions with regulators," Mr Mohl said.

    "It will also be dependent on the outcome of asset sales, with the proceeds of any assets sales to be used to reduce the debt of the new AMP.

    "However, a restructuring of the reset preference shares as part of the demerger proposal is likely (but) AMP would only initiate any such restructuring with the approval of AMP shareholders to the demerger proposal."


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