R&Q faces provisional liquidation
Bermuda-based R&Q Insurance Holdings is set to file for provisional liquidation as it attempts to complete the sale of a subsidiary to Canadian private equity firm Onex Corporation.
The troubled insurer, which has been trying to sell programme management business Accredited since November 2023, said it considered provisional liquidation and the subsequent sale of the company to Onex to be its best option to secure value.
R&Q said it will request that trading in the company's shares on the AIM exchange be suspended and it will be filing for liquidation in the Supreme Court of Bermuda "in due course". R&Q's shares had dropped from £1.85 on June 12 to 6p in trading yesterday before the shares were suspended. They closed at 10p.
R&Q announced it had agreed to sell Accredited for $465 million to Onex in November. At that time, R&Q planned to sell the company and to continue to operate as a legacy insurer. Chief executive officer William Spiegel and Thomas Solomon, chief financial officer, were to transfer to Accredited and R&Q would seek a new top executive.
Onex said then that Accredited provided underwriting capacity to managing general agents with support from the global reinsurance market. It said Accredited operates as a hybrid fronting carrier, retaining a portion of the premium and risk it underwrites while ceding the majority to reinsurance partners. It is the only dedicated hybrid fronting carrier to provide A- rated insurance capacity in each of the US, UK, and EU, with licenses to write admitted business in all 50 US states.
However, the sale ran into difficulties when the Bermuda Monetary Authority demanded a review of reserves and blocked several legacy insurance deals. R&Q was also told to pause the redemption of $20 million worth of notes.
R&Q was then forced to strike a stand-still deal with creditors in late April.
It said last week that efforts to salvage the deal had brought “significant additional unexpected costs and expenses” while binding R&Q's hands on its rump legacy business to render a “material impact on the Company's stability as a business and as a going concern”.
Onex them made an alternative proposal put the parent company into provisional liquidation and to complete the sale via that process. Remaining R&Q assets would also likely be sold off.
“In such circumstances there would be very little, if any, chance of any value accruing to the Company's shareholders,” R&Q management warned. "If the sale does not proceed on its original terms and the available net cash proceeds are not available to facilitate a financial de-leveraging of R&Q, R&Q will not be able to repay its debt facilities as they become due, and R&Q would therefore be unable to continue as a going concern."
R&Q said in a statement: "Following the Board's exploration and evaluation and taking all other relevant factors into consideration, including the cash resources currently available to the company, the Board has concluded that the Alternative Proposal represents the best option to secure value at this time.
"The implementation of the alternative proposal will involve the company filing for a provisional liquidation in Bermuda and the Board expects the sale of Accredited to Onex to then be implemented through that process. The provisional liquidators would then look to realise value from the Company's remaining assets, at the end of which the remaining Company would be wound up. The Directors believe that, in those circumstances, there will be very little, if any, chance of any value accruing to the Company's shareholders."
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