Posted on 15 Apr 2010
Prudential wants to bring minority investors into some of the Asian businesses it plans to buy from AIG to help ease capital curbs imposed by regional regulators.
China, Thailand and Malaysia are among the countries where sale of locally held minority stakes to investors could help to ease restrictions on dividend payments to the Pru and capital flows, according to people familiar with the group's thinking.
Investors in Britain’s biggest insurer will vote next month on a $21bn (£13.6bn) rights issue that is needed to fund the Pru’s takeover of AIA, AIG’s Asian arm. The company is in the final stages of preparing its prospectus for the $35.5bn deal.
Asian regulators have put in place restrictions limiting loans and advances to AIG from subsidiaries of AIA, according to the US company’s recent filings. The regulatory controls can also restrict dividend payments.
Analysts and investors have estimated that more than $3bn of capital could be trapped in AIA units. This has raised concern over whether the enlarged Pru would be able to fund its Asian expansion plans, pay the interest on the debt it would take on as part of the AIA deal and maintain dividends.
Pru investors, however, have been told that even with existing restrictions, the enlarged Pru in Asia would be able to release to the parent group about $1bn per year, which would cover its growth, debt and dividend needs.
The Pru announced on Wednesday that Rob Devey, UK chief executive, would lead the integration of AIA.