R&Q in lock-up deal over Accredited sale; anticipates significant cut in proceeds

R&Q Insurance Holdings has entered into a lock-up agreement with several lending parties for restructuring certain financial debts as it seeks approval for the completion of Accredited’s $465 million sale to Onex. It says that the expected proceeds have been slashed by approximately 61.76% for the lower limit and 47.62% for the upper limit.

In October 2023, R&Q agreed a conditional agreement with funds advised by Onex Corporation to sell 100% of the equity interest in Randall & Quilter America Holding, the holding company of its hybrid fronting business Accredited. 

R&Q has signed a lock-up agreement with the syndicate members of the Main Banking Facility, the syndicate members of the FALLOC, the provider of the SAFER LC, the holders of the senior notes, the provider of the Cayman LC Facility and the Bermuda LC Facility and the majority of the holders of the subordinated notes.

Following the agreement, the parties will now move to the negotiation of the necessary implementation documentation. Completion of the restructuring is subject to the successful finalisation and execution of such documentation.

According to the R&Q board, the lock-up will provide a stable base on which the restructuring can be implemented. The lock-up agreement contains undertakings regarding the restructuring and termination events. It includes the terms on which the locked-up parties will consent to the sale and the use of the proceeds of the sale. It also contains an agreement to not take certain enforcement action under the terms of R&Q’s existing financial instruments to which the locked-up parties are party.

The company also confirmed that it will remain in close dialogue with its lending banks, providers of credit and other financing providers as it seeks to finalise the required documentation.

Additionally, R&Q has secured the necessary approvals from the Malta Financial Services Authority, the Arizona Department of Insurance and the Florida Office of Insurance Regulation and merger clearance from the EU Commission.

The company hopes the remaining required approvals will be received shortly.

R&Q noted that it has engaged in an intensive period of discussion with its lenders and regulators, which has resulted in the company incurring significant additional unexpected costs and expenses (either on its own behalf or on behalf of or due to the requirements of other stakeholders). Moreover, it has been constrained since that time in relation to its ability to consummate external legacy transactions.

As a result of these factors, as well as a degree of general stress to the company's businesses during this period, R&Q said its available net cash proceeds on closing are now expected to be between approximately $65 million and $110 million (previously $170 million and $210 million). 

Following closing of the sale, the board still intends to use the cash proceeds to facilitate a de-leveraging of R&Q while retaining liquidity and working capital for its ongoing commitments.

R&Q currently expects closing of the Sale to occur in Q2 2024.

"The Board continues to work expeditiously towards completion of the Sale and reiterates its belief that a prompt and successful conclusion to the Sale represents the best outcome for all stakeholders. R&Q remains in communication with Onex regarding progress of the Sale and Onex continues to work with R&Q to support and advance towards completion of the Sale," the company stated.

In the meantime, the board believes the legacy plan outlined in December remains achievable, although acknowledges that it may now take longer to fully implement the plan. 

"The Board of R&Q continues to evaluate any and all options to realise value from its legacy insurance business for the benefit of all its stakeholders, including its shareholders, whether that be through the ongoing trading of that business or through alternative strategic options," it added.

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