Security Capital Assurance Form 8-K (date of earliest event reported - 04/05/2007)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
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FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of
1934
Date
of Report (Date of earliest event reported): April 5,
2007
————————————
SECURITY
CAPITAL ASSURANCE LTD
(Exact
name of registrant as specified in its charter)
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|
Bermuda
|
001-32950
|
Not
applicable
|
|
(State
or other jurisdiction
of
incorporation)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification No.)
|
One
Bermudiana Road, Hamilton, Bermuda HM 11
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (441) 292 8515
Not
Applicable
(Former
name or former address, if changed since last report)
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Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01. Entry
into a Material Definitive Agreement.
On
April
5, 2007, Security Capital Assurance Ltd (the “Company”) sold 250,000 of
Fixed/Floating Series A Perpetual Non-Cumulative Preference Shares, par value
$0.01 per share, having a liquidation preference of $1,000 per share (the
“Preference Shares”) to Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, and Wachovia Capital Markets, LLC and certain other
initial purchasers (the “Initial Purchasers”).
The
Preference Shares have not been registered under the Securities Act of 1933,
as
amended (the “Securities Act”). The Company offered and sold the Preference
Shares to the Initial Purchasers in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act. The Initial
Purchasers may resell the Series A Preference Shares to qualified institutional
buyers pursuant to Rule 144A under the Securities Act and to non-US persons
pursuant to Regulation S under the Securities Act. The net proceeds to the
Company from the offering of the Preference Shares, after deducting the Initial
Purchasers’ discount and the estimated offering expenses payable by the Company,
were approximately $245.5 million.
The
terms
of the Preference Shares were determined by resolutions of a subcommittee
designated by the Finance and Risk Oversight Committee of the Board of Directors
of the Company at a meeting held on March 23, 2007 (the “Subcommittee
Resolutions”) and by resolution of Claude LeBlanc, Executive Vice President,
Corporate Development and Strategy, of the Company, on March 29, 2007 (the
“Liquidation Preference Resolution”) acting pursuant to the Subcommittee
Resolutions. Copies of an extract of the Subcommittee Resolutions and the
Liquidation Preference Resolution are attached hereto as Exhibits 4.1 and 4.2,
respectively, and each is incorporated herein by reference.
Until
September 30, 2017, dividends on the Preference Shares will be payable
semiannually on a non-cumulative basis, when, as and if declared by the
Company’s board of directors, on March 31 and September 30 of each year at a
fixed rate equal to 6.88% per annum on the liquidation preference. From and
after September 30, 2017, dividends on the Preference Shares will be payable
quarterly on a non-cumulative basis, when, as and if declared by the Company’s
board of directors, on March 31, June 30, September 30 and December 31 of each
year at a floating rate equal to three-month LIBOR plus 2.715% on the
liquidation preference. Dividends on the Preference Shares, if declared, will
be
payable commencing on September 30, 2007. The Preference Shares will be
perpetual securities with no fixed maturity date and will not be convertible
into any of the Company’s other securities. The Form of Regulation S Global
Preference Share Certificate and Form of 144A Global Preference Share
Certificate are attached hereto as Exhibits 4.3 and 4.4, respectively, and
the
terms of each is incorporated herein by reference.
Replacement
Capital Covenant
On
April
5, 2007, in connection with the sale of the Preference Shares, Security Capital
Assurance Ltd (the “Company”) entered into a Replacement Capital Covenant (the
“Replacement Capital Covenant”), whereby the Company agreed for
the
benefit of holders of one or more designated series of our long-term debt
securities that we may issue in the future that (i) the Company will not redeem,
exchange or purchase the Preference Shares and (ii) none of the Company’s
subsidiaries will purchase or exchange the Preference Shares, except, subject
to
certain limitations, to the extent that the applicable redemption, exchange
or
purchase price does not exceed a specified amount of cash proceeds from the
sale
of certain specified qualifying replacement capital securities raised during
the
period commencing on the 180th calendar day prior to the date of notice of
the
redemption or the date of purchase. The Company has made no decision as to
whether, or when, the Company would issue debt securities that would have the
benefit of that covenant. While such provisions are in effect, there could
be
circumstances where the Company would wish to redeem, exchange or purchase
some
or all of the Preference Shares but be restricted from doing so.
In
order
to give effect to the intent of the Company set forth in Recital C of the
Replacement Capital Covenant, the Company is entering into and disclosing the
content of the Replacement Capital Covenant with the intent that the covenants
provided for in the Replacement Capital Covenant be enforceable by each future
Covered Debtholder (as defined in the Replacement Capital Covenant), and that
the Company be estopped from disregarding its covenants in the Replacement
Capital Covenant.
The
Replacement Capital Covenant may be terminated if (i) holders of at least a
majority by principal amount of the then-effective series of covered debt
consent or agree in writing to terminate the Replacement Capital Covenant,
(ii)
the Company no longer has outstanding any indebtedness that qualifies as covered
debt or (iii) the Company no longer has any outstanding Preference Shares.
In
addition, if not earlier terminated, the Replacement Capital Covenant will
terminate on September 30, 2047; provided, however, that the September 30,
2047
termination date may be extended at the Company’s option.
The
foregoing description of the Replacement Capital Covenant does not purport
to be
complete and is qualified in its entirety by reference to the full text of
the
Replacement Capital Covenant, which is filed as Exhibit 4.5 hereto and is
incorporated by reference herein.
Registration
Rights Agreement
In
connection with the sale of the Preference Shares, the Company entered into
a
registration rights agreement with the Initial Purchasers (the “Registration
Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company
has agreed to file a registration statement with the Securities Exchange
Commission relating to an offer to exchange the Preference Shares for publicly
traded preference shares having substantially identical terms. If that
registration statement is not filed within 180 days of the closing date of
this
offering or has not become effective within 240 days of the closing date of
this
offering, subject to certain exceptions, we will be required to pay additional
non-cumulative dividends to holders of the Preference Shares. A copy of the
Registration Rights Agreement, the terms of which are incorporated herein by
reference, is attached as Exhibit 4.6 hereto.
Item
3.02. Unregistered
Sales of Equity Securities.
The
information set forth in Item 1.01 of this Current Report is incorporated herein
by reference.
Item
9.01. Financial
Statements and Exhibits.
(d) Exhibits.
The following exhibits are filed herewith:
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Exhibit
No.
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Description
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4.1
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Extract
of the Minutes of a Meeting of a Subcommittee of the Finance and
Risk
Oversight Committee held on March 29, 2007.
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4.2
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Certificate
of Claude LeBlanc pursuant to authority vested by the Subcommittee
of the
Finance and Risk Oversight Committee.
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4.3
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Form
of Regulation S Global Preference Share Certificate.
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4.4
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Form
of 144A Global Preference Share Certificate.
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4.5
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Replacement
Capital Covenant, dated April 5, 2007.
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4.6
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Registration
Rights Agreement, dated April 5,
2007.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
SECURITY
CAPITAL ASSURANCE LTD
(Registrant)
By: /s/
Kirstin Romann Gould
Name: Kirstin
Romann Gould
Title:
Secretary