17 December 2004 – LAWFUEL – First with law news – Barclays Capital helps Friends Provident complete £380m securitisation first Barclays Capital was lead manager of the ground-breaking £380m securitisation completed today by Friends Provident Life and Pensions Limited, the independent UK life insurer. Friends Provident is the first UK proprietary life insurer to raise tax deductible core Tier 1 capital by securitising the surplus from a defined block of its policies. International law firm Freshfields Bruckhaus Deringer advised Barclays Capital on structuring and implementing the transaction.
This is the first transaction of its kind to comply with the new rules in the Integrated Prudential Sourcebook for Insurers and the Insurance Group’s hard capital requirements which take effect from the beginning of 2005. By securitising surplus from a defined block of policies, Friends Provident has secured Tier 1 funding at a much lower cost than alternative core Tier 1 capital.
The transaction is the first to use a UK regulated reinsurance special purpose company as provider of unfunded reinsurance to Friends Provident and involved a number of other innovations.
Simeon Rudin, the partner who led the Freshfields team that advised on the structuring and implementation, said, ‘There were a number of advantages to using the structure adopted to reduce funding costs, including reducing linkage to originator corporate credit risk. The transaction required considerable innovation in a changing regulatory, tax and accounting environment. The rules for the new regulatory regime were not adopted until shortly before launching the transaction. And, recent and proposed amendments to the taxation of insurance companies and derivatives and accounting changes arising from IAS 39 needed to be factored into the structuring, making it quite a challenge’.
The Freshfields team included partners Michael Thompson, Stephen Hoyle, and Richard Tett, and associates Philip Withey, Jonathan Page, Matt O’Callaghan and Laurent Sykes, and trainees Nicholas McVeigh and David Taylor.
Friends Provident were advised by Herbert Smith, while Ambac, who guaranteed the Notes, received advice from Linklaters.
For more information contact:
Simeon Rudin, partner T +44 20 7832 7368 E firstname.lastname@example.org
Graham Taylor, PR manager T +44 20 7785 2918, E email@example.com
Notes for editors
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Freshfields Bruckhaus Deringer’s structured finance team is widely regarded as one of the world’s best. It operates at the cutting edge of structured finance work, structuring and implementing innovative and complex transactions in structured products, securitisations, derivatives and tax driven schemes. The group works for a range of organisations including major financial institutions, asset originators, asset purchasers, insurers, rating agencies and other market organisations.
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