(Removes reference to Punch Taverns in paragraph 1)
-- Neil Collins is a Reuters columnist. The views expressed are his own --
By Neil Collins
LONDON, July 2 (Reuters) - Hugh Osmond is at it again, trying to float his latest adventure, Pearl Group.
Life assurance and public houses (an earlier adventure) have little in common except, in Osmond's eyes, the chance to make him serious money. Unfortunately, Pearl's route to the stock market is currently looking decidedly gritty, thanks to the little matter of a 6.58 percent 500 million pound sterling eurobond.
The bond is perpetual subordinated (Tier 1) debt, and was issued by old Resolution, Clive Cowdery's lash-up of a life assurer. After considerable drama, Pearl took over Resolution in 2008. Last March, Osmond announced that although Pearl had plenty of money, he wasn't going to pay the interest.
The price collapsed to 10 pence in the pound and the bondholders were stunned. They thought they owned a relatively safe slice of capital in a solvent life office, but Osmond begs to differ. He argues that the bonds were in fact part of Resolution's equity, that Pearl has no obligation and that the responsibility rests with the old Resolution board or the trustees of the bond.
It's taken the bondholders a couple of months to get their corporate heads round this, and even now their lawyers are only "gathering evidence". Perhaps they have a sneaking suspicion that Osmond is right, and that he's entitled to treat the bonds as zero-coupon perpetuals. With so many parties, and so much at stake, this could turn into a corporate version of Jarndyce v. Jarndyce, the interminable legal battle in Charles Dickens' Bleak House.
Fortunately for the bondholders, who include the usual suspects like AXA, F&C and Fidelity, they have further leverage. Pearl's refinancing is now complete, and Osmond is itching to float the business [ID:nLT293015], not least to give him a currency to exploit the opportunities "unequalled for several decades" that he can see in the life business.
New Pearl would go straight into the FTSE 100, and can hardly afford to be scrapping with some of the biggest UK equity investors. A resolution (sorry) is thus in everyone's interests, and now Pearl's refinancing is in place, Osmond can afford to be emollient.
Sensing this, buyers have nibbled at these supposedly worthless bonds, taking the price up to 20 pence in the pound. There seems no realistic chance of repayment at par, but if Pearl, the well-padded directors of old Resolution, the bond trustees (and all the various parties' insurers) get together, there could still be a happy ending, of sorts.
(Edited by David Evans)