Insurer Phoenix confident on debt renegotiation

By Myles Neligan

LONDON | Fri Mar 23, 2012 10:02am GMT

LONDON (Reuters) - British insurer Phoenix (PHNX.L) said international efforts to shore up Europe's banks and its own strengthening finances made it more confident of renegotiating hefty bank loans that limit its ability to pay dividends or acquire rivals.

"We are in a far better position as a firm and the markets are far more benign to have these discussions now than they were a year ago," Phoenix Chief Executive Clive Bannister told reporters on Friday.

The European Central Bank has since December offered banks cheap three-year loans under its so-called Long Term Refinancing Operation, easing a bank funding drought triggered by the eurozone sovereign debt crisis.

"Banks are in a different position after LTRO when it comes to thinking about risk-weighted assets," Bannister said.

Phoenix's thinly-traded shares were up 1.8 percent at 561.5 pence by 0918 GMT, valuing the company at about 1 billion pounds. The stock has fallen 16 percent in the past year, lagging a 5.9 percent drop in the Stoxx 600 European insurance share index .SXIP.

"This, in our view, is a positive outlook on bank renegotiation given the current backdrop," analysts at JP Morgan Cazenove wrote in a note.

Phoenix, formerly known as Pearl, wants to extend the repayment schedule on some 2.7 billion pounds ($4.3 billion) of bank debt, of which about 1 billion falls due by the end of 2014.

Under the terms of the loans, many of them taken on to fund the acquisition of rival Resolution in 2007, Phoenix's dividend payments are capped at 72 million pounds per year.

The company, set up to buy insurers that are closed to new business and merge them into a more profitable whole, has also put takeovers on hold until it has rescheduled its loans.

Phoenix, which last month ended talks about selling itself to buyout firm CVC Capital Partners, said its 2011 operating profit rose 4 percent to 387 million pounds, ahead of the 317 million pounds expected by analysts.

The improvement, driven by more efficient management of Phoenix's life insurance funds, also helped it pay off some of its debt, with total debt as a proportion of equity down to 46 percent by the end of 2011 from 52 percent a year earlier.

The company aims to reduce this further to 43 percent by the end of this year.

Phoenix also said its chairman, Ron Sandler, would step down in 2012 once a replacement has been found.

($1=0.6326 British pounds)

(Reporting by Myles Neligan; Editing by Sudip Kar-Gupta and Mark Potter)

Source: http://uk.reuters.com/article/2012/03/23/uk-phoenix-idUKBRE82M0AO20120323?feedType=RSS&feedName=businessNews