The wholly owned UK subsidiary of Terra Nova (Bermuda) Holdings Ltd. has embarked on a refinancing plan, part of which is designed to take advantage of current low interest rates to reduce its interest expense.

Terra Nova Insurance (UK) Holdings plc has initiated a cash tender offer to purchase $95.5 million worth of its 10.75% Senior Notes due 2005.

At the same time, the UK subsidiary is soliciting consents to eliminate substantially all restrictive covenants and certain related provisions in the indenture pursuant to which the notes were issued.

The tender offer is pre-conditioned on, among other things, the receipt of consents to proposed amendments from the holders of at least a majority in the principal amount of the notes, and the receipt of funds by the company, sufficient to pay the total consideration and expenses associated with the tender offer and consent solicitation.

And holders who tender their notes will be required to consent to the proposed amendments.

Deputy chairman of the parent company, John Dwyer, stated: "The decision to undertake this restructuring to lock in lower interest costs complements our long term focus on profitability and prudent capital management.'' The transaction is expected to remain open until midnight New York time on May 15, unless extended. The consent solicitation will remain open until May 1 or the date on which the company receives the required consents to the proposed amendments, which ever is later.

The purchase price to be paid for each $1,000-principal amount of Notes tendered will be based on a fixed spread of 25 basis points over the yield of the 5.875 percent US Treasury Note due June 30, 2000, as calculated May 12, 1998, or if the offer is extended, the third business day prior to the expiration date, less five dollars.

The company will pay a consent payment of five dollars per $1,000-principal amount to holders who tender their Notes and give their consent at, or prior to midnight New York time on the consent date.

The consent date is the later of May 1, 1998 or the consent achievement date.

The consent achievement date is the date on which the company receives consents from holders representing a majority of the Notes to modify the indenture pursuant to which the notes were issued.

Tendered notes may be withdrawn and related consents may be revoked at any time on, or prior to, the consent achievement date, but not thereafter. The terms of the offer are more fully described in the Offer to Purchase and Consent Solicitation Statement, dated April 20.

The information agent for the offer and the solicitation is New York-based MacKenzie Partners, Inc. The dealer manager is Donaldson, Lufkin & Jenrette Securities Corp.