Pearl makes an offer to bondholders

Pearl, the insurance group built by the pizza entrepreneur Hugh Osmond, took steps to repair its damaged relationship with bondholders tonight by announcing a complex transaction that would prevent dividends being paid to shareholders if bondholders were denied payments. The group, which wants to achieve a full stock exchange listing in London in summer 2010, infuriated bondholders last March when it deferred coupon payments on bonds that had been issued by the life insurance company Resolution it took over in 2007 . With company troubleshooter Ron Sandler newly installed as chairman , Pearl is trying to mend its reputation with holders of tier one debt, which is regarded by the Financial Services Authority as one the strongest forms of capital. A "zombie insurer" that buys up insurance policies, the group is keen to embark on a fresh acquisition spree, which allows it to keep cutting the cost of managing the insurance policies. It needs to resolve a number of outstanding issues – including the row with bondholders – before it can achieve its goal of a full listing on the London Stock Exchange. Jonathan Moss, chief executive of Pearl, said: "We are very keen to resolve all outstanding issues with our tier one bondholders and have held extensive discussions with bondholder representatives over the past few months which have helped us to understand their thinking, and which we hope has helped bondholder representatives understand our position." The holders of those £500m of tier one debt are now being offered the chance to exchange £100m of the bonds for cash worth 45% of the face value. The company, which was forced to take a cash injection from the investment company Liberty Acquisition Holdings in the summer, is also asking noteholders to accept a reduction in the face value of their investments to 75%. In return, Pearl will pledge that it will not pay dividends to shareholders if it were to miss a coupon – or repayment – on a bond. Osmond has already agreed to have his stake in Pearl reduced as a result of the transaction with Liberty, which is listed on the European stock market Euronext. Moss insisted that the group was now "emerging from last year's market dislocation with a strengthened capital position, new ownership and a new chairman in Ron Sandler". Sandler was parachuted into Northern Rock when it was nationalised in February 2008 and continues to chair the Newcastle-based lender. Moss said: "We have a compelling business model as the leading consolidator of run-off life assurance books and we have ambitions to move to a primary listing in London and to acquire new books of business in due course." The group last week took steps to simplify its capital structure by buying back warrants to reduce the amount of capital held as "dilutive instruments".