7th Dec 2006 07:01
Advent Capital (Holdings) PLC07 December 2006 For publication in the United Kingdom only. Not for release, publication, or distribution in or into any other jurisdiction including the United States, Canada, Australia, South Africa, The Republic of Ireland or Japan. Advent Capital (Holdings) PLC ("Advent" or the "Company") New Equity and Debt Issue Proposed Establishment of Class 3 Bermuda Reinsurer Advent Capital (Holdings) PLC, the specialist Lloyd's reinsurer, today announcesan equity capital raising of £9.6 million through the issue of new ordinaryshares of the Company and an unsecured senior debt issue of up to US$20 million(approximately £10.1 million). The net proceeds of the equity and debt issueswill be used to capitalise a new Class 3 Bermuda reinsurer ("Advent Re"). SUMMARY • Advent Re Holdco, a wholly-owned subsidiary of the Company, has been incorporated as the holding company of Advent Re • Advent Re will be established as a Class 3 Bermuda reinsurer, subject to Bermuda Monetary Authority ("BMA") consent • The Company will invest, through Advent Re Holdco, the net proceeds of its debt and equity issues, estimated to be US$37.5 million (approximately £19 million) in the capital of Advent Re • Advent Re will have access to business through Advent's long standing relationships with clients and an experienced underwriting team in Brian Caudle and Duncan Lummis. This summary should be read in conjunction with the detailed announcement below. Brian Caudle - Chairman - commented: "The establishment of a Bermuda platform is an exciting development for Advent,allowing us to take full advantage of the favourable conditions beingexperienced in the retrocessional market in which Advent has historicallyspecialised. I will look to focus my attention on strategic matters at Grouplevel including the development of the Advent Re business over the next fewyears while continuing my oversight of the Lloyd's operations as ExecutiveChairman of the Company. I believe the Company has the right platforms fromwhich to grow our business and take advantage of the current attractive marketconditions for the principal lines of business in which we operate." Rationale Advent Re is being created to take advantage of a lack of retrocessionalcapacity which exists in the reinsurance market today. The Advent Directors donot expect the new capital which is currently entering the retrocessional marketto be sufficient to put immediate and significant downwards pressure onretrocessional rates, in particular on business written as of 1 January 2007. Ingeneral, retrocessional rates continued to increase during 2006 as a result ofthe lack of capacity. Advent Re intends to take advantage of these attractive market conditions byunderwriting a limited number of retrocessional contracts, predominantly as of 1January 2007. The retrocessional business to be written by Advent Re does not form part of the2007 business plan of Syndicate 780, details of which were set out in our ThirdQuarter Results Announcement of 15 November 2006. The intention is for AdventRe to develop its reinsurance business along the lines of a more traditionaltreaty business over the next several years. Advent Group's business as a wholewill therefore have the advantage of providing access to both London andBermudian reinsurance platforms in line with latest market dynamics. This accessto Bermuda, with its less onerous capital requirements than the United Kingdomand quicker recognition of profit for capital purposes, should enable the AdventGroup to better utilise its capital and to assist in providing improvedshareholder returns. Structure Advent Re Holdco is a wholly owned subsidiary of Advent which, in turn, willhold 100% of the share capital of Advent Re. Advent Re will initially be an unrated reinsurer, but it will aim to obtain anappropriate rating from AM Best as it develops its reinsurance business over thenext several years. Contracts underwritten by Advent Re will initially be fullycollateralised in order to provide assurance to cedants of its financialstrength. Brian Caudle is stepping down as Director of Underwriting and as a director ofAdvent's subsidiary, Advent Underwriting Limited, to lead the development of theBermudian platform as Chairman of Advent Re. Mr Caudle remains as ExecutiveChairman of Advent. Duncan Lummis will be appointed as Chief UnderwritingOfficer of Advent Re and Dermot Caslin will be appointed as Chief FinancialOfficer and Principal Representative in Bermuda. Lloyd Tunnicliffe, currentlythe Active Underwriter for Syndicate 780, will take on the position of ChiefUnderwriting Officer for Advent Underwriting Limited. The Company also announces that it has advised Lloyd's that it will providecapacity of £126 million (83.7%) in support of Syndicate 780's total capacityfor the 2007 year of account which is estimated to be £150.6 million. 2007 Underwriting Plan Advent Re will have an experienced underwriting team, who are familiar with thebusiness to be underwritten and, through their association with Syndicate 780,have existing relationships with the brokers placing the business. Advent Re's proposed management team expect that the key features of theretrocessional reinsurance contracts underwritten by Advent Re for 2007 will beas follows: • risks will be underwritten by way of ultimate net lossprotections (traditional reinsurance) or by way of original loss warranties(OLW's); • reinsurance contracts will have defined aggregate financiallimits in specific territories and by peril; • contracts will be selective and with clients known to AdventRe; • Advent Re will lead every contract; • contracts will predominantly be underwritten as at 1 January2007 on a "Losses Occurring During" basis; and • potential exposure under the reinsurance contracts will beclearly defined with a fully collateralised maximum aggregate limit, with noreinstatements and a maximum loss per event. Details of the Placing Details of the proposed equity placing ("Placing") are as follows:- • Placing of 36,960,860 new ordinary shares of the Company ("PlacingShares") to raise £9.6 million before expenses. Of this amount, approximately£2.0 million will be subscribed for by Fairfax Financial Holdings Limited, theCompany's biggest shareholder • Issue price of 26 pence per Placing Share, representing a discountof approximately 25% to the closing price of 34.5 pence per share on 6 December2006, the last business day prior to announcement Fairfax Financial Holdings Limited currently holds 46.8% of the issued sharecapital of the Company. This will reduce to 46.1% following the Placing. The Company has entered into an agreement with Ferris, Baker Watts Incorporatedof Richmond, Virginia pursuant to which Ferris, Baker Watts has procured placeesfor the Placing Shares, conditional on their Admission to AIM. The Placing Shares will be issued credited as fully paid and will rank onAdmission pari passu in all respects with the existing ordinary shares,including as to the right to receive and retain all dividends and otherdistributions declared, made or paid after the date of allotment in respect ofthe ordinary shares. The Placing Shares are not being made available to thepublic and are not being offered or sold in any jurisdiction where it would beunlawful to do so. The closing of the Placing is expected to be on or about 11 December 2006.Application will be made to the London Stock Exchange for the Placing Shares tobe admitted to trading on AIM. It is expected that Admission will becomeeffective and that dealings will commence on or about 12 December 2006. Details of proposed Senior Debt issue It is proposed that the senior debt will be placed on the following terms: • Up to US$20 million (£10 million); • Interest-only loan at US$ LIBOR +4.15%, subject to an upward adjustment of 0.35% depending upon the eventual rating of the debt; • Term: 20 years; • No financial covenants; • Conditional upon the closing of the Placing; and • Ranks in priority to the subordinated debt issued in June 2005. It is expected that the proposed senior debt issue will close on or about 14December 2006. 7 December 2006 For further information please contact: Advent Capital HoldingsKeith Thompson Tel: 020 7743 8200Chief Operating Officer Trevor Ambridge Tel: 020 7743 8200Chief Financial Officer Neil Ewing Tel: 020 7743 8250Investor Relations Officer Pelham Public Relations Tel: 020 7743 6670Charles VivianPolly Fergusson Advent Capital (Holdings) PLC, which listed on AIM in June 2005, is a leadingLloyd's insurer that manages and participates on Syndicate 780. The Syndicate ispredominantly a short tail property reinsurance and insurance syndicatespecialising in catastrophe business. Biographical details of Advent Re proposed management team Brian Caudle - Chairman Mr Caudle has over 50 years' experience in the insurance industry. He foundedSyndicate 780 in 1974 and was its active underwriter until the end of 1999. Heis also a founder director and shareholder of Advent and Advent's ExecutiveChairman. Duncan Lummis - Chief Underwriting Officer Mr Lummis has been with Advent Underwriting Limited since 1988. He has beenresponsible for the underwriting of retrocessional lines of business ofSyndicate 780 since 2002. Dermot Caslin - Finance and Administration officer and Principal Representativein Bermuda Mr Caslin was the Chief Financial Officer of Tate and Lyle Reinsurance Limited(Bermuda) from 1991 to 2006. He previously worked for PricewaterhouseCoopers(Bermuda) from 1989 to 1991. THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION IN ORINTO THE UNITED STATES. THE MATERIAL SET FORTH HEREIN IS FOR INFORMATIONALPURPOSES ONLY AND IS NOT INTENDED, AND SHOULD NOT BE CONSTRUED, AS AN OFFER OFSECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION. THESECURITIES OF THE COMPANY DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BEREGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIESACT"), OR THE APPLICABLE LAWS OF ANY STATE, AND MAY NOT BE OFFERED OR SOLDWITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN ATRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACTAND APPLICABLE STATE LAWS. THERE IS NO INTENTION TO REGISTER ANY PORTION OFTHE OFFERING OF SECURITIES IN THE UNITED STATES OR TO CONDUCT A PUBLIC OFFERINGOF SECURITIES IN THE UNITED STATES. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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