Simpson Thacher called in after takeover puts Pearl in the red

Pearl Group has begun talks to restructure £3bn of debt, some of which was used to buy rival Resolution in 2008, with Simpson Thacher & Bartlett winning the mandate from the ­insurane giant.

It is understood that Simpson Thacher is acting for Pearl after advising it on the financing for its £5bn acquisition of ­Resolution. Finance partner Stephen Short acted on that deal.

Ashurst represented the banks, Lloyds TSB, Dresdner Kleinwort and RBS, on the Resolution deal after Linklaters was conflicted out. Both Ashurst and ­Linklaters are in line for the lenders’ counsel role, as Pearl owner Hugh Osmond ­considers his options.

Pearl Group built up £2.2bn of debt to fund the takeover of Resolution and owes another £800m across its business. However, the debt is ringfenced from its life assurance companies, which have more than seven million policyholders.

The structure of the ­Resolution merger is being investigated by the Financial Services Authority (FSA), alongside a separate probe into the conduct of former Resolution owner Clive Cowdery and other company directors.

It is understood that the FSA wants to tighten the rules on insurers’ capital amid plummeting share prices in the sector.

Pearl’s takeover of Resolution, which began as a merger between Resolution and Friends Provident, called in a host of firms, with rival bids from Standard Life and, finally, Pearl.

Pearl turned to longstanding adviser Freshfields Bruckhaus Deringer, led by financial institutions partner Will Lawes, while Resolution instructed Herbert Smith corporate partner Malcolm Lombers. Standard Life called on Clifford Chance while Friends Provident turned to Linklaters corporate partners David Cheyne and Owen Clay.

Simmons & Simmons was given a role by new client Royal London Mutual Insurance Society on an agreement with Pearl to fund part of its approach to Resolution.