TIDMCAT
RNS Number : 3248Q
CATCo Reinsurance Opps Fund Ltd
26 October 2021
The following amendment has been made to the ' Markel CATCo
Announces Commencement of Schemes of Arrangement and Improved Terms
of Buy-Out Transaction for Investors in
Markel CATCo Reinsurance Fund Ltd. and CATCo Reinsurance
Opportunities Fund Ltd. ' announcement released on 26 October 2021
at 7:00 under RNS No 2160Q.
In the 'Buy-Out of Retro Fund Investors' section of the term
sheet attached to the announcement, the accelerated return amount
to Public Fund Investors holding Ordinary Shares and C Shares has
been amended to reflect increased estimated return amounts of the
following:
Public Fund Investors holding Ordinary Shares will receive an
estimated accelerated return of approximately $0.32 per Ordinary
Share (totaling approximately $48.3 million of Closing NAV (as of
31 August 2021) including an Early Consent Fee and Additional
Consideration)
Public Fund Investors holding C Shares will receive an estimated
accelerated return of approximately $0.51 per C Share (totaling
approximately $42.2 million of Closing NAV (as of 31 August 2021)
including an Early Consent Fee and Additional Consideration)
All other details remain unchanged.
The full amended text is shown below.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION UNDER THE RETAINED
UK LAW VERSION OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014
PURSUANT TO THE MARKET ABUSE (AMMENT) (EU EXIT) REGULATIONS 2019
(SI 2019/310).
Markel CATCo Announces Commencement of Schemes of
Arrangement and Improved Terms of Buy-Out Transaction for
Investors in
Markel CATCo Reinsurance Fund Ltd. and CATCo Reinsurance
Opportunities Fund Ltd.
London, 26 October, 2021 - Markel CATCo Investment Management
Ltd. (MCIM) today announced that, following the conclusion of the
Early Consent Deadline of 22 October 2021 with respect to the
Buy-Out Transaction announced on 27 September 2021, it has received
a substantial level of investor support for the transaction, with
investors representing over 90% of Markel CATCo Reinsurance Fund
Ltd. (provisional liquidators appointed) (the Private Fund) and
investors representing over 95% of CATCo Reinsurance Opportunities
Fund Ltd. (provisional liquidators appointed) (the Public Fund,
together with the Private Fund, the Funds) returning support
undertakings or otherwise indicating their intention to support the
Buy-Out Transaction.
Each of the boards of the Private Fund and Public Fund has
resolved to proceed with the commencement of schemes of arrangement
in Bermuda (Schemes) in order to implement the Buy-Out Transaction
and will shortly issue a letter to all investors giving details of
the matters to be addressed at the first court hearing for the
Schemes, as well as further details regarding the Buy-Out
Transaction (the Practice Direction Letter). The Practice Direction
Letter will be distributed directly to investors and/or via the
transaction website: https://catcobuyout.alixpartners.com .
As previously announced, the Buy-Out Transaction is being
facilitated by Markel Corporation. Markel Corporation has agreed
certain improvements to the terms of the Buy-Out Transaction which
result in a significant increase in the return to all investors.
The improved terms are set out in the term sheet attached to this
announcement, with key terms including:
-- an accelerated return of 100% of the net asset value (NAV) of
the Funds on the closing date (including the Aquilo Fund and each
of the other funds of the Private Fund), with (as originally
proposed) investors retaining the right to any upside at the end of
the applicable run-off period if currently held reserves exceed the
amounts necessary to pay ultimate claims;
-- an additional cash contribution of approximately $54 million
from Markel Corporation or one of its affiliates, which will be
used to off-set transaction costs and go forward running costs of
the funds, and to make additional pro rata distributions to
investors; and
-- an increase in the Early Consent Fee from 1% to 2% of each
investor's proportional entitlement to the current NAV as at
closing.
Markel Corporation has also agreed to pay a work fee to two
investors, one in the Private Fund and one in the Public Fund, in
consideration for their time spent negotiating the improvements to
the Buy-Out Transaction announced today.
It is the Public Fund board's intention that post the completion
of this transaction and once the funds released from the
transaction have been returned to investors, the board will consult
with investors with a view to establishing how the Public Fund
should continue to operate and whether it should maintain its
listing until the Private Fund has completed its liquidation.
To allow for investors who have not yet returned support
undertakings to consider these improved terms, the deadline for
investors to enter into an undertaking to support the Buy-Out
Transaction has now been extended to 11.59 p.m. ADT on 9 November
2021 (the Extended Early Consent Deadline).
Investors who have already agreed to be bound by the terms of a
support undertaking prior to this announcement are not required to
return another undertaking and will be entitled to the 2% Early
Consent Fee provided that they remain in compliance with the terms
of the support undertaking, including voting to approve the
applicable Scheme. Investors who have not yet entered into a
support undertaking may do so prior to the Extended Early Consent
Deadline in order to be eligible for the Early Consent Fee.
The process for entry into a support undertaking by Private Fund
investors and Public Fund investors remains the same as previously
announced. Full details are available on the transaction website:
https://catcobuyout.alixpartners.com .
Any questions in relation to th e execution of the support
undertaking by Private Fund Investors should be directed to Centaur
at investorservices.bda@centaurfs.com or +441 405 2410.
Any questions in relation to acceptance of the support
undertaking by Public Fund Investors should be directed to the
registrar, Link Group at operationalsupportteam@linkgroup.co.uk or
+44371 664 0321.
The person responsible for arranging release of this
announcement is: Judith Wynne, Assistant Secretary to the Public
Fund.
Disclaimers and important notices
This announcement is for information purposes only and is not
intended to, and does not, constitute or form part of any offer or
invitation to purchase, otherwise acquire, subscribe for, sell or
otherwise dispose of, any securities or the solicitation of any
vote or approval in any jurisdiction pursuant to the Buy-Out
Transaction or otherwise. The Schemes will be made solely pursuant
to the terms of the scheme documents to be sent to investors in the
Funds in due course. The scheme documents will contain the full
terms and conditions of the Schemes, including details of how to
vote in respect of them. Any decision in respect of, or other
response to, the Schemes should be made only on the basis of the
information in those documents. The information contained in this
announcement is for background purposes only and no relianc e may
or should be placed by any person for any purpose whatsoever on the
information contained in this announcement or on its completeness,
accuracy or fairness. Recipients of this announcement should
conduct their own investigation, evaluation and analysis of the
business, data and property described in this announcement. This
announcement does not constitute a recommendation concerning any
investor's decision or options with respect to the Buy-Out
Transaction. The information in this announcement is subject to
change.
The distribution of this announcement and the terms of the
Buy-Out Transaction are subject to restrictions and may not be made
except pursuant to registration with or authorisation by the
relevant securities regulatory authorities or an exemption
therefrom. Therefore, persons who may come into possession of this
announcement are advised to consult with their own legal advisors
as to what restrictions may be applicable to them and to observe
such restrictions. This announcement may not be used for the
purpose of an offer or invitation in any circumstances in which
such offer or invitation is not authorised.
No action has been or will be taken in any jurisdiction by the
Funds that would or is intended to permit a public offering, or any
other offering under circumstances not permitted by applicable law,
of any securities.
Further to the above, the release, publication or distribution
of this announcement in other jurisdictions may be restricted by
law and therefore any persons who are subject to the laws of any
applicable jurisdiction (including any jurisdiction where local
laws or regulations may result in a significant risk of civil,
regulatory or criminal exposure if information concerning the
Buy-Out Transaction is sent or made available to investors in that
jurisdiction (Restricted Jurisdictions)) should inform themselves
about, and observe, any applicable legal or regulatory
requirements. In particular, the ability of persons who are
resident in such other jurisdictions or who are subject to the laws
of another jurisdiction to participate in the Buy-Out Transaction
may be affected by the laws of the relevant jurisdictions in which
they are located or to which they are subject. Any failure to
comply with applicable legal or regulatory requirements of any
jurisdiction may constitute a violation of securities laws in that
jurisdiction.
Copies of this announcement and any formal documentation
relating to the Buy-Out Transaction are not being, and must not be,
directly or indirectly, mailed or otherwise forwarded, distributed
or sent in or into or from any Restricted Jurisdiction or any
jurisdiction where to do so would constitute a violation of the
laws of such jurisdiction and persons receiving such documents
(including custodians, nominees and trustees) must not mail or
otherwise forward, distribute or send them in or into or from any
Restricted Jurisdiction. Doing so may render invalid any related
purported vote in respect of the Buy-Out Transaction (or the
related Schemes).
Certain of the statements in this announcement or (and any
related oral statements) may be considered forward-looking
statements
This announcement (including information incorporated by
reference in this announcement), oral statements made regarding the
Buy-Out Transaction, information accessed through
https://catcobuyout.alixpartners.com and other information
published by MCIM and the Funds contain statements which are, or
may be deemed to be, "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements are prospective in nature and are not
based on historical facts, but rather on current expectations and
projections of the management of MCIM and the Funds about future
events, and are therefore subject to risks and uncertainties which
could cause actual results to differ materially from the future
results expressed or implied by the forward-looking statements. The
forward-looking statements contained in this announcement include
statements relating to the expected effects of the Buy-Out
Transaction, the expected timing and scope of the Buy-Out
Transaction and other statements other than historical facts.
Often, but not always, forward-looking statements can be identified
by the use of forward-looking words such as "plans", "expects" or
"does not expect", "is expected", "is subject to", "budget",
"projects", "strategy", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Although MCIM and
the Funds believe that the expectations reflected in such
forward-looking statements are reasonable, they can give no
assurance that such expectations will prove to be correct. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future.
There are a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by such forward-looking statements. These factors include,
but are not limited to: the ability to complete the Buy-Out
Transaction; the ability to obtain requisite regulatory and other
required approvals and the satisfaction of other conditions on the
proposed terms and schedule; as future market conditions, changes
in general economic and business conditions, the behaviour of other
market participants, the anticipated benefits from the proposed
transaction not being realised as a result of changes in general
economic and market conditions in the countries in which the Funds
operate, weak, volatile or illiquid capital and/or credit markets,
changes in tax rates, interest rate and currency value
fluctuations, the degree of competition in the geographic and
business areas in which the Funds operate and changes in laws or in
supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual
results to differ materially from those in the forward-looking
statements. Such forward-looking statements should therefore be
construed in the light of such factors. Neither MCIM nor the Funds,
nor any of their respective associates or directors, officers or
advisers, provides any representation, assurance or guarantee that
the occurrence of the events expressed or implied in any
forward-looking statements in this announcement will actually
occur. You are cautioned not to place any reliance on these
forward-looking statements. Other than in accordance with their
legal or regulatory obligations, neither MCIM nor the Funds is
under any obligation, and they expressly disclaim any intention or
obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
This announcement speaks only as of the date issued.
For Markel CATCo investor inquiries, contact:
Mark Way
Telephone: +1 441-493-9001
For Public Fund investor inquiries, contact:
Numis
Hugh Jonathan
Telephone: +44 (0) 20 7260
SUBJECT TO CONTRACT
INVESTOR BUY-OUT TERM SHEET
This Term Sheet sets out the proposed terms for the early return
of Net Asset Value ("NAV") in the side pocket investments (the
"Side Pockets") held at Markel CATCo Re Ltd. (the "Reinsurer"),
together with a premium, for the benefit of investors (the
"Investors") who hold shares in:
a) funds of Markel CATCo Reinsurance Fund Ltd. (the "Private
Fund"), which include direct investments made in each segregated
account of the Private Fund other than the Aquilo Fund, including
the Markel CATCo Diversified Fund (the "Master Fund"), Diversified
Fund II, Limited Diversified Arbitrage Fund, Diversified Arbitrage
Fund, GTL Diversified Fund, Markel Diversified Fund and QIC
Diversified Fund (collectively, the "Retro Funds", and such
investors in the Retro Funds, the "Retro Fund Investors"),
b) CATCo Reinsurance Opportunities Fund Ltd. (the "Public Fund,"
and such investors, the "Public Fund Investors"), which invests
directly in the Master Fund, and
c) the Aquilo Fund, a segregated account of the Private Fund
(such investors in the Aquilo Fund, the "Aquilo Investors").
As set out in detail below, the early return of NAV to the Retro
Fund Investors and Public Fund Investors on the Closing Date (as
defined below) will be funded by (i) the Available Distribution
Amount (as defined below), (ii) the Retro Fund Cash (as defined
below) and (iii) the Buy-Out Amount (as defined below) provided by
an affiliate of Markel Corporation (the "Purchaser", and the Markel
Affiliates funding the Purchaser, the "FundingCos"). The early
return of NAV to the Aquilo Investors will be funded through a
combination of funding from the Purchaser (through the FundingCos)
and the release of contractually trapped cash currently held by
fronting reinsurers of the Aquilo Fund, which shall be made
possible by Markel Corporation, through a wholly-owned designee,
providing adverse development cover to the fronting reinsurer. The
premium paid to all Investors will be the Additional Consideration
described below and funded by Markel Corporation or one of its
affiliates.
Buy-Out of Retro The Investors in the Retro Funds will be
entitled to a total return of 102%
Fund Investors of Closing NAV (defined below) including an Early
Consent Fee plus (i) a distribution in cash equal to their
proportional entitlement to $34 million (the "Additional
Consideration") and (ii) any Upside.
At the date of completion (the "Closing Date"), Retro Fund
Investors (including the Public Fund) will receive an aggregate
accelerated return of the following proportion of Closing NAV for
each Side Pocket:
-- 100% for 2016 Side Pocket,
-- 100% for 2017 Side Pocket,
-- 100% for 2018 Side Pocket, and
-- 100% for 2019 Side Pocket,
(the "Accelerated Distribution Amount"), plus their
proportionate amount of the Additional Consideration and the Early
Consent Fee, if applicable.
As a result of the payment of the Accelerated Distribution
Amount, on the Closing Date:
-- Public Fund Investors holding Ordinary Shares will receive an estimated accelerated return of approximately $0.32 per Ordinary Share (totaling approximately $48.3 million of Closing NAV (as of 31 August 2021) including an Early Consent Fee and Additional Consideration)
-- Public Fund Investors holding C Shares will receive an
estimated accelerated return of approximately $0.51 per C Share
(totaling approximately $42.2 million of Closing NAV (as of 31
August 2021) including an Early Consent Fee and Additional
Consideration)
Closing NAV Closing NAV will be Current NAV,
plus $15 million released from a current contingent reserve held
by the Private Fund, which will be primarily applied to fund the
payment of Transaction Costs (as defined below),
plus $20 million cash contribution from Markel Corporation or
one of its affiliates,
less the remaining Administrative Expenses (as defined below),
which will be reserved on the Closing Date.
Additionally, for the Closing NAV with respect to the Public
Fund, cash on hand will also be deducted.
"Current NAV" means the current NAV available as at the most
recent month end prior to the Closing Date, provided that this
amount may never be less than NAV as of 31 August 2021.
Buy-Out Amount of In order to fund the buy-out of Retro Fund
Investors, the Purchaser will
Retro Fund Investors purchase shares in the Reinsurer from the
Private Fund for a cash purchase price (the "Buy-Out Amount") equal
to the Accelerated Distribution Amount:
-- less the amount of funds, if any, that are available for
distribution to Retro Fund Investors that have been released from
each Side Pocket of the Reinsurer and approved for distribution by
the Bermuda Monetary Authority but not yet returned to the Retro
Fund Investors in that Side Pocket , as at the last day of the
month prior to the Closing Date (the total of all such amounts
across all Side Pocket s of the Reinsurer in the aggregate, the
"Available Distribution Amount"),
-- less the aggregate amount of cash, if any, that is held at each Retro Fund (other than the Administrative Expenses) to cover operating and other costs of that Retro Fund (the total of amount of consolidated cash at the Retro Funds being the "Retro Fund Cash ").
The Additional Consideration will be funded by Markel
Corporation or one of its affiliates on the Closing Date.
Return to Aquilo Investors Aquilo Investors will be entitled to
a total return of 102% of Closing NAV plus (i) the Additional
Consideration and (ii) any Upside.
On the Closing Date, Aquilo Investors will receive a
distribution in cash equal to their proportional entitlement to
100% of Closing NAV of the Aquilo Fund (the "Aquilo Accelerated
Distribution Amount") plus their proportionate amount of the
Additional Consideration and the Early Consent Fee, if
applicable.
Aquilo Buy-Out In order to fund the buy-out of Aquilo Fund
Investors, the Purchaser will
Amount of Aquilo purchase shares in the Reinsurer from the
Private Fund for a cash purchase
Fund Investors price (the "Aquilo Buy-Out Amount") equal to the
Aquilo Accelerated Distribution Amount less the amount of trapped
cash released in connection with any a dverse development cover
provided by Markel Corporation, through a wholly-owned designee, to
a fronting reinsurer in respect of the assets of the Aquilo
Fund.
The Additional Consideration will be funded by Markel
Corporation or one of its affiliates on the Closing Date.
Administrative Expenses Administrative Expenses will be funded
from cash reserves deducted from Current NAV on or before the
Closing Date and allocated as set out below, including:
1. Transaction Costs: costs for implementation of the deal,
which are currently estimated to be approximately $15 million. 10%
of these costs will be allocated pro rata to the Aquilo Fund with
the remaining Transaction Costs allocated pro rata to each Side
Pocket . Transaction Costs are estimates only and the actual amount
of fees incurred will be paid.
2. Ordinary Course Fees: estimated operating and other fees for
the remaining run-off of the Markel CATCo business, which are
currently estimated to be approximately $14 million. These costs
will be allocated among the Aquilo Fund and each Side Pocket based
on a weighted pro rata distribution determined by "time to
run-off."
-- For example, Side Pocket 2019 is estimated to have the most
time for final run-off, so will have a larger proportion of fees
allocated to it.
-- Ordinary Course Fees related to the operation of the Public
Fund are allocated among the Public Fund Investors only.
3. Reserve: an additional reserve of approximately $5.8 million,
which will be an amount equal to 20% of the total Transaction Costs
and Ordinary Course Fees allocated to the Aquilo Fund and each Side
Pocket .
After closing, no additional fees or expenses will be deducted
from distributions of Closing NAV and there will be no continuing
management fees charged by the Manager (any such fees will have
been accelerated and included in the Ordinary Course Fees for the
run-off of the Funds).
After closing, additional fees or expenses arising in respect of
the Aquilo Fund that are not covered by the reserve will be
deducted from distributions to Aquilo Fund Investors.
Any amounts reserved for Administrative Expenses remaining after
wind down of the Public Fund, the Private Fund, the Manager and the
Reinsurer will be returned to relevant Investors.
Upside Distributions After the Closing Date, if and when any
capital is released (i) in excess of the Buy-Out Amount allocable
to a particular Side Pocket of the Reinsurer or (ii) in excess of
the Aquilo Buy-Out Amount allocable to the Aquilo Fund, and in each
case approved for distribution by the Bermuda Monetary Authority,
each relevant Public Fund and Private Fund Investor shall be
entitled to receive the amounts distributed. Distributions, if any,
will occur one time per annum or more at the discretion of the
Manager .
Upon receiving a return from the Private Fund as contemplated in
this provision, the Public Fund will distribute the proceeds to the
Public Fund Investors in accordance with its ordinary
practices.
Information Rights Investors will receive monthly Manager's
Reports setting out remaining NAV for each Side Pocket at the
relevant month end and the amount of capital released, including
the amount that will be used to repay the Buy-Out Amount and the
amount that will be returned to Investors.
Early Consent Fee Investors that support the proposal set out in
this Term Sheet by agreeing to the terms of the Investor Deed of
Undertaking, in accordance with the instructions accompanying the
Undertaking, shall receive on the Closing Date a cash fee in an
amount equal to 2% of their proportional amount of Current NAV at
the Closing Date (provided that they comply with the terms of their
undertaking) (the "Early Consent Fee").
Work Fee (i) Funds managed by PKA A/S and (ii) Almitas Capital
will be entitled to a cash fee in an amount equal to 2% of their
proportional amount of Current NAV at the Closing Date. The work
fee will be paid by the Private Fund and/or the Public Fund and
funded by Markel Corporation or one of its affiliates.
Release To enable the early return of NAV to the Investors, and
as a condition to and in consideration of the foregoing, each
Investor, the Purchaser, Markel Corporation, the FundingCos, the
Manager, the Private Fund (in respect of itself and all of its
segregated accounts), the Public Fund and the Reinsurer (in respect
of itself and all of its segregated accounts) shall provide an
irrevocable and unconditional mutual release of each and every
claim of any nature it may have against each of the Released
Parties related to the business of the Reinsurer, the Private Fund,
the Public Fund and the Manager and the Investors' shares.
" Released Parties " means each Investor, the Purchaser, the
FundingCos, Markel Corporation, the Private Fund (in respect of
itself and all of its segregated accounts), the Public Fund, the
Reinsurer (in respect of itself and all of its segregated
accounts), the Manager and each of their former and existing
affiliates, directors, managers, shareholders, officers,
controlling persons, beneficial owners or interest holders,
advisory board members, employees, consultants, agents,
subsidiaries, members, managers, predecessors and successors in
interest, heirs, executors and assignors or assignees, nominees,
participants, partners, limited partners, general partners,
principals, fund advisors, attorneys, financial advisors,
investment bankers, accountants, other professionals or
representatives, sub-advisors (and their respective affiliates
directors, managers, shareholders, partners, principals, members,
officers, controlling persons, employees and agents), and agents
(including any individual who serves at the Manager's request as a
director, officer, partner, trustee, or the like of another entity)
and/or the legal representatives and controlling person of any of
them.
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END
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