ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF- BALANCE SHEET ARRANGEMENT OF A REGISTRANT
On September 27, 2007, CastlePoint Bermuda Holdings, Ltd., (the "Company") a
wholly owned subsidiary of CatlePoint Holdings, Ltd., completed a trust
preferred securities transaction. In connection with the transaction, the
Company established CastlePoint Bermuda Holdings Statutory Trust I, a Delaware
statutory trust, on September 20, 2007 (the "Trust"). The Trust issued and sold
$30.0 million aggregate principal amount of capital securities (the "Trust
Preferred Securities") in a private placement and issued $0.9 million in common
securities (the "Common Securities") to the Company. The Trust used the proceeds
of these issuances to purchase $30.9 million of the Company's Fixed/Floating
Rate Junior Subordinated Interest Debentures due September 27, 2007 (the
"Debentures"). The Company paid compensation to the Placement Agents in the
amount of $600,000 in connection with the transaction.
The terms for the Trust Preferred Securities and the Debentures are essentially
identical. Interest on the Debentures and distributions on the Trust Preferred
Securities are payable quarterly in arrears on March 15, June 15, September 15,
and December 15, commencing on December 15, 2007, at an annual rate equal to
8.39% beginning on the date of original issuance and ending on (but excluding)
December 15, 2012, and thereafter at an annual rate equal to LIBOR (as defined
in the Indenture, dated as of September 27, 2007 ("Indenture"), between the
Company and Wilmington Trust Company as debenture trustee) plus 3.50%, reset
quarterly, and upon terms more fully set forth in the Indenture. The Debentures
are the sole assets of the Trust and are subordinate to the Company's senior
obligations.
The Debentures mature on December 15, 2037, and are redeemable at the company's
option on any March 15, June 15, September 15, or December 15, commencing in
December 2012. If the Company redeems any amount of the Debentures, the Trust
must redeem a like amount of the Trust Preferred Securities. Interest on the
Debentures may be deferred at any time or from time-to-time for a period not
exceeding 20 consecutive quarterly payments, provided there is no event of
default and the deferral does not extend beyond maturity. If the Company elects
to defer interest on the Debentures, or if an event of default occurs, the
Company will generally not be able to declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the company's common stock. The entire principal of the
Debentures may become due and payable immediately if an event of default occurs.
Concurrently with the issuance of the Debentures and the Trust Preferred
Securities, the Company entered into a Guarantee Agreement, dated September 27,
2007, between the Company and Wilmington Trust Company under which the Company
guaranteed the payment of various obligations associated with the Trust
Preferred Securities. The terms of the Trust Preferred Securities are governed
by an Amended and Restated Declaration of Trust, dated September 27, 2007 (the
"Declaration"), among the Company, as sponsor, and Wilmington Trust Company, as
Institutional Trustee, and Wilmington Trust Company, as Delaware Trustee.
The Company intends to use the net proceeds from the sale of the Debentures to
the Trust for general corporate purposes, including acquisitions.
On September 28, 2007, the Company issued a press release regarding the
foregoing transaction. A copy of that press release is attached hereto as
Exhibit 99.1.
The Trust Preferred Securities were issued in a transaction exempt from
registration requirements under the Securities Act of 1933, as amended, pursuant
to section 4(2) and applicable state securities laws, and unless so registered,
may not be offered or sold in the United States, except pursuant to an
applicable exemption from the registration requirements of the Securities Act of
1933, as amended, and applicable state securities laws.
The preceding descriptions of the Indenture, Declaration, Debentures and
Guarantee Agreement contained herein are qualified in their entirety by
reference to the Indenture, Declaration, Debentures and Guarantee Agreement
attached hereto as Exhibits and incorporated herein by this reference.