AMP 1.16% $1.07 amp limited

hmmm, what's going on here?

  1. 3,567 Posts.
    AMP double-counts capital sent overseas
    Aug 25
    Tony Boyd

    The solvency problems in the AMP's UK life funds were so serious last year that the company was forced to double-count about $1.1 billion in capital.

    The double-counting of capital occurred when AMP raised $1.1 billion in a preference share issue in Australia and included it the Australian accounts and then lent it to the UK and included it as capital there.

    AMP chief executive Andrew Mohl said the double-counted capital had to be removed as part of the demerger and that was one of the main reasons the company had been forced to raise $1.7 billion in a placement and share purchase plan in May.

    "My predecessors, bless their hearts, had basically double-played the capital in Australia by lending it to the UK and treating as capital in the UK," he told The Australian Financial Review.

    "So we had to replace that. So that added to the funding requirement," Mr Mohl said

    AMP's latest accounts refer to the double-counted capital in a note relating to the UK Financial Services business.

    The note said that shareholder capital backing for the UK business was £2.059 billion ($5.4 billion) "including £418 million double count of capital".

    Mr Mohl said that about $1.45 billion of the $1.7 billion raised in May had been transferred to the UK to repay inter-group loans and the remaining $250 million would be transferred soon.

    That capital raising will be followed by another later this year in order to refinance AMP's $1.1 billion in reset preference shares.

    AMP is considering a rights issue or possibly another hybrid equity issue to refinance the prefs and obtain sufficient funds to buy majority control of Henderson's UK business from Pearl Assurance shareholders.

    That deal is essential to make the UK business attractive for a sharemarket listing.

    Mr Mohl said advisers were working on an innovative structure for the planned capital raising.

    "We may structure the refinancing in a way that we can dial up or dial down the equity and the Tier 1 components that can take into account asset sales," he said.

    "This is where investment banks earn their money because they come up with clever ideas, whereby you can have an initial raising and a subsequent raising, and maybe not go ahead with it if there are asset sales."

    As far as 'New AMP' in Australia was concerned, the main thing was to ensure its credit rating was BBB or higher.

    "We have to achieve a triple B credit rating otherwise we start having issues with bond holders," Mr Mohl said.

    "I have got enough capital but there are two issues: the mix of capital is not right and I don't have the capital in the right spot. What I really need is cash over in the UK."

    Meanwhile, the managing director of the Commonwealth Bank, David Murray, has not ruled out bidding for AMP although he admits it is not a priority.

    "We already have a strong business in the same area as their Australian business . . . focused and dealing with the transformation program is more important to me than amalgamation there. Now, so I wouldn't rule it out but I wouldn't put a lot of money on it either," Mr Murray told the Nine Network's Business Sunday program.

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