As R&Q continues progress discussions regarding the sale of Accredited, buyer Onex has proposed an alternative transaction structure to that of the original sale that could be implemented in the event that the original closing conditions were not able to be satisfied.
Back in October 2023, the non-life specialty insurer announced it had entered into a conditional agreement to sell its Accredited program Management business to private equity investment manager Onex Corporation.
According to such agreement, Onex stated it would by 100% of the equity interest in Randall & Quilter America Holding Inc., which is the holding company of Accredited.
By selling the program management business, R&Q expects to undertake a “material de-leveraging” as it tries to restructure.
The period of negotiation regarding the proposed restructure has resulted in the company incurring significant additional unexpected costs and expenses.
Additionally, since December 2023, R&Q has been “constrained… in relation to its ability to consummate external legacy transactions.”
“These factors, as well as further adverse reserve development and a degree of general stress to the Company’s businesses during this period, have had a material impact on the Company’s stability as a business and as a going concern,” the insurer stated.
R&Q and Onex have continued to discuss implementing the sale of Accredited on its original terms, at the same time, the “Alternative Proposal” has been made.
“The Board is currently exploring and evaluating all options that may be available to the Company, including alternative transactions (including the Alternative Proposal) and potential sources of liquidity, whilst continuing to work to complete the original Sale,” said R&Q).
The implementation of the Alternative Proposal would involve the parent company, R&Q, filing for a provisional liquidation in Bermuda and then completing the sale of Accredited to Onex through that process.
The provisional liquidators would then look to realise value from the Group’s remaining assets, the insurer explained.
It was also highlighted that: “The Directors believe that in such circumstances there would be very little, if any, chance of any value accruing to the Company’s shareholders.”
According to R&Q, if the sale of Accredited 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, the company will not be able to repay its debt facilities and would therefore be unable to continue as a going concern.
If R&Q does enter provisional liquidation, it would request that trading in the company’s ordinary shares on AIM be suspended immediately.
In April 2024, R&Q announced it expected the transaction, approved by the shareholders in January 2024, to close in the second quarter of 2024.
According to R&Q, the sale of Accredited is at an enterprise value of $465 million, which represents an expected equity value of approximately $438 million.
An R&Q spokesperson stated back then: “The Sale will enable the Board to undertake a material financial de-leveraging of R&Q and return the capital solvency position back to target levels, enhancing the business’ ability to execute the Board’s existing strategy of transitioning R&Q Legacy to a capital efficient and stable recurring fee-based business model.”
