Florida-based primary insurer, FedNat Holding Company, has announced that it and certain wholly-owned subsidiaries have filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S., with the company set to explore all strategic alternatives, including a sale of its assets.
FedNat says that it has filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida in an effort to maximise value for all stakeholders.
As part of the process, the carrier “will evaluate all strategic alternatives to maximize value for stakeholders, whether that be a reorganization of its business or a sale of its assets.”
To provide liquidity to support day-to-day operations during the Chapter 11 process, FedNat notes that it has roughly USD 6.5 million of cash on hand, which enables it to operate business uninterrupted, including the timely payment of employee wages and benefits and continued servicing of customers.
Additionally, the firm will file customary “First Day” motions to allow it to maintain operations in the ordinary course. FedNat says that it plans to pay its employees in the usual manner and continue their primary benefits and certain customer programs without disruption.
The firm explains that it has engaged GGG Partners, LLC as financial advisors, and Nelson Mullins Riley & Scarborough LLP as legal advisors.
Court filings reveal that the firm has faced numerous challenges, including being “Severely impacted by, among other things, an elevated number of severe weather events giving rise to catastrophe losses (particularly losses stemming from FNHC’s non-Florida books of business), rate issues, and litigation abuse.”
Further, it seems that the debtors have already been in talks over an asset purchase agreement, explaining that they “aim to be in a position to submit bid procedures relating to a sale or sales in short order.”
Back in April, FedNat warned on its ability to continue as a going concern in light of a rating downgrade by Demotech, with the firm later saying it was considering becoming much smaller ahead of the challenging mid-year renewals.
In July, the firm’s CEO, Michael Braun, resigned from his position and was replaced by David Patterson as interim CEO.
FedNat appointed Katie Goodman, Managing Partner of GGG, to serve as its Chief Restructuring Officer, while the Board elected Richard Gaudet, GGG’s Head of Finance and Accounting, to serve as interim Chief Financial Officer effective November 18, 2022.
