EXPENDITURE STRATEGY - MUNICH RE

1. Munich Re, the world's second-biggest reinsurer, plans to sell about 1 billion euros ($1.3 billion) of subordinated bonds to reduce its cost of capital taking advantage of the favorable capital-market environment. The perpetual bonds will be marketed to investors during the week ending June 1 and will be callable by Munich Re from 10 years after the date of issue. The bond will have a fixed coupon and thereafter a floating rate

2. It also announced plans to pay out at least 8 billion euros to shareholders by the end of 2010.

[Raising subordinated capital is one way of optimizing capital structure and hence cost of capital. Subordinated bonds rank below senior debt in the event of a default. They will be treated as equity by regulators and rating firms under certain conditions, which Munich Re plans to fulfill.]

The opportunity cost of money keeps changing with business performance and the economic environment and often amenable for favorable tweaking.
And lean and mean almost always works well.

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