Pearl in talks to restructure debts

Banks are discussing a possible restructure of Pearl Group's debts following pressure from the FSA, reports suggest.

Last week, rumours the FSA wanted Pearl to reduce its £3bn debt began circulating, and today owner Hugh Osmond is thought to be considering ways of restructuring the business.

Negotiations are said to be underway with Lloyds Banking Group, Dresdner Kleinwort and Royal Bank of Scotland over a possible debt-for-equity swap.

Osmond may also be preparing to inject £350m of his personal fortune into the insurer, which bought Resolution Life for £5bn last year.

Much of Pearl's debt - around £2.2bn - is held in Impala, the bid vehicle used to acquire Resolution, with another £800m held elsewhere in the business.

However, changes in insurance company regulation, implemented by the FSA in light of huge stock market falls, mean Pearl may struggle to service its debt from the cash flow of its life companies.

The firm has around 7m policyholders, but the FSA may not allow it to release the capital from these policies in order to protect investors. This could prevent the group from paying interest on its loans, creating a need to restructure its debts.

Contact: John Bakie, Tel: 020 7484 9805, e-mail: John.Bakie@incisivemedia.com