Reinsurance News

Crane Holdings to divest legacy asbestos liabilities

16th August 2022 - Author: Jack Willard

Crane Holdings, Co. has announced that it has divested Redco Corporation – a wholly owned subsidiary that holds liabilities including asbestos liabilities and related insurance assets to Spruce Lake Liability Management Holdco LLC.

The transaction indemnifies Crane for all legacy asbestos liabilities.

At closing, Crane contributed approximately $550 million in cash to Redco, and Spruce Lake made a capital contribution of $83 million.

Crane financed its contribution with a combination of short-term debt and cash on hand.

In addition, Spruce Lake will assume the operational management of Redco, which includes the administration of all the asbestos claims and collection of existing insurance policy reimbursements.

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As a result of the transaction, Crane has removed all asbestos obligations and liabilities, related insurance assets, and associated deferred tax assets from the company’s consolidated balance sheet. The divestiture will result in an estimated one-time after-tax loss of approximately $170 million that will be recorded in the third quarter of 2022 which will be excluded from adjusted earnings per share.

Evercore acted as exclusive financial advisor to Crane in connection with the transaction, and legal counsel was provided by Simpson Thacher & Bartlett LLP; Skadden, Arps, Slate, Meagher & Flom LLP; and, K&L Gates LLP. Nomura Securities International, Inc. acted as exclusive financial advisor to Spruce Lake in connection with the transaction.

Max Mitchell, Crane President and Chief Executive Officer, commented: “Today’s announcement provides finality and certainty to investors regarding asbestos obligations, and it removes the distraction of asbestos related risks. Further, eliminating ongoing payments for asbestos related defense and indemnity costs will increase annual free cash flow available for us to invest in our business, both organically and inorganically. The transaction will also give us substantially more flexibility to optimize the capital structures for post-separation Crane Company and Crane NXT in a manner that positions both companies for growth and value creation.

“This transaction is yet another step demonstrating our firm and longstanding commitment to delivering long-term growth and sustainable value creation for all stakeholders. That commitment is evident in our consistent and differentiated execution; the numerous actions we have taken to shape our portfolio including acquisitions that strengthen our strategic growth platforms, as well as divestitures to streamline and focus our portfolio; and, our announcement earlier this year to pursue a separation into two independent, publicly traded companies.”

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