R&Q Insurance Holdings Ltd. and Obra Capital, Inc., the recently rebranded Vida Capital, have invested in a new joint venture to acquire a wholly owned subsidiary of global safety equipment manufacturer, MSA Safety Incorporated.
In connection with the closing of the deal, MSA Safety contributed roughly $341 million in cash to the acquired company, in addition to related insurance assets, while the joint venture contributed an additional $35 million.
The acquired subsidiary currently holds product liability claims related to coal dust, asbestos, silica, and other exposures.
Following the transaction, R&Q will provide claims and management services and Obra will provide investment management services to the divested subsidiary.
Ultimately, the deal has enabled MSA Safety to remove all legacy cumulative trauma product liability reserves, related insurance assets, and associated deferred tax assets of the divested subsidiary from its balance sheet.
R&Q’s Executive Chairman, William Spiegel, commented: “We are pleased to form a joint venture with Obra to acquire and professionally manage these legacy liabilities, providing MSA Safety with a complete finality solution. This is an exciting transaction for R&Q, showcasing the capabilities, reputation and innovation of our Legacy Insurance business.
“This will see our reserves and non-insurance liabilities under management increase to over $1 billion, comprising two pools: traditional insurance reserves via Gibson Re, and non-insurance legacy liabilities, furthering our goal of becoming a manager of legacy liabilities.”
Obra’s CEO, Blair Wallace, said: “With our team’s decades of experience investing in, managing and servicing long dated liabilities, we are excited to partner with R&Q on this liability solution. The transaction highlights both our ability to deploy capital into this type of risk as well as our capability of focusing on targeted investment returns in a portfolio framework that considers both asset risk and the liability requirements for a broad variety of liability types.”
Nish Vartanian, MSA Safety Chairman, President, and CEO added: “We are pleased to complete the sale of this subsidiary to R&Q and Obra, trusted specialist partners with proven track records of managing legacy matters. This important action enables greater focus on MSA’s future growth, profitability, and continued strong return of value to our shareholders. The completion of this transaction allows us to do more of what we do best – developing and manufacturing innovative safety technologies and protecting the world’s workers.”
“This transaction enhances predictability in the cash flows of our business and reduces our risk profile. Our balance sheet remains strong, and we are confident in our ability to delever within 12 to 18 months while maintaining our current dividend policy,” said Lee McChesney, MSA Safety Senior Vice President and CFO.
Andrew Pinkes, R&Q’s CEO of Legacy Insurance, added: “While we have been providing Legacy Insurance solutions to insurers, reinsurers and corporate captives for decades, this transaction opens up a new growth avenue in providing similar services for non-insurance, corporate liabilities. This transaction is a strong demonstration of R&Q’s expertise in underwriting and managing long-tailed liabilities, as well as our innovative approach to structuring and delivering comprehensive finality solutions.”
While Peter Polanskyj, Head of Structured Credit at Obra, commented: “This transaction highlights Obra’s diverse investment capabilities ranging from deploying opportunistic capital into specialty risk situations to leveraging our more traditional investment capabilities across a variety of fixed income capital markets to enhance investor returns.”
The transaction closed on January 5th, 2023. MSA Safety says that it expects the transaction to be recognized in its first quarter 2023 results.
Nomura Securities International, Inc. acted as exclusive financial advisor to R&Q. Mayer Brown LLP acted as legal counsel.
