Clifford Chance advises Swiss Re on landmark facility backed by issuance of Pre-Capitalized Trust Securities

Global law firm Clifford Chance has advised Swiss Re on the issuance of US$1 billion Pre Capitalized Trust Securities or “P-Caps” by Three Pillars Funding Trust No.1, a Delaware statutory trust. The proceeds from the issuance were invested in US Treasury strips and will fund the Trust’s obligations to Swiss Re under a facility agreement with the Trust whereby Swiss Re has the right and, in certain trigger events, the obligation to issue subordinated notes to the Trust in exchange for those Treasuries.

The issuance marks a significant milestone as the first P-Caps transaction by a European reinsurance and IFRS reporting company and the first to provide for the issuance of subordinated debt intended to qualify as Tier 2 capital.

Michael Dakin, Partner at Clifford Chance, commented: “We are delighted to have advised Swiss Re on this innovative transaction. Its successful execution demonstrates the continued development of capital solutions that provide financial flexibility and certainty of funding and marks an important milestone in the evolution of the P-Caps market including its relevance to non-US insurance companies.”

The mandate leveraged Clifford Chance’s global platform, bringing together lawyers across multiple jurisdictions to advise on a sophisticated offering involving English, Delaware and New York law documentation and a novel structure specifically tailored for an IFRS reporting company.

The cross-border Clifford Chance team was led by partners Michael Dakin and Simon Sinclair, working closely with counsel Sannu Shrestha, director Maria de Elizalde, associates Aritra Saha and Hannah McLellan. The wider team included UK tax partner Cameron Dwyer, the US tax team, partner Avrohom Gelber and associate Taylor O’Brien, and support on US regulatory and financing matters from counsel Young Kim, professional support lawyer Rebecca Hoskins, Abigail Simon and Jill Ruderfer.