Ballantyne Re board announces restructuring lock-up support agreement

By Caroline Salls

Pittsburgh, April 12 – Ballantyne Re plc’s directors announced Friday that the company has entered to a lock-up support agreement with Ambac Assurance UK Ltd., Assured Guaranty Europe plc and Assured Guaranty Corp., some class A noteholders, Security Life of Denver Insurance Co. (SLD) and Swiss Re Life and Health America Inc. in connection with a proposed restructuring transaction.

According to a news release, the restructuring covers Ballantyne’s obligations under its class A-1 notes, class A-2a notes, class A-2b notes, class A-3a notes, class A-3b notes, class A-3c notes and class A-3d notes.

The company said the restructuring will be implemented through a scheme of arrangement under Part 9 of the Irish Companies Act 2014, requiring the consent of the requisite majorities of the relevant class A noteholders.

Following implementation of the restructuring, it is intended that Ballantyne will be wound up by way of a solvent liquidation.

Restructuring terms

Under the restructuring, an indemnity reinsurance agreement between Ballantyne and SLD will be replaced with a Swiss Re agreement.

The assets from Ballantyne’s reinsurance trust account (the RTA) will be sold to complete the reinsurance agreement transaction and to make payment to the holders of scheme notes in full satisfaction of their claims against Ballantyne.

The financial guarantees provided by Ambac in connection with the class A-2a notes, the class A-3a notes, the class A-3b notes, the class A-3c notes and the class A-3d notes will be commuted.

Claims under the financial guarantees provided by Assured Guaranty in connection with the class A-2b notes will be preserved.

An estimated 51% cash payment will be made to all class A noteholders, an additional cash payment of 17.4% of the par value of the class A-2a notes will be made to each holder of those notes, and a payment of 14.5% of the par value of the class A-3 Notes will be made to the holders of those notes.

The company will also pay a lock-up fee of 1.25% of the par value of the scheme notes held by each consenting noteholder.

Deferred consideration expected to represent up to 1% of the par value of the scheme notes will be distributed to class A noteholders through trust arrangements.

Financial deficit

At the date of its latest audited financial statements on Dec. 31, 2017, Ballantyne said it reported total assets of $1,254,800,000 and total liabilities of $2,408,300,000, including insurance contract liabilities of $384.6 million that rank in priority to the scheme notes and scheme note liabilities of $1,551,900,000 and other creditors of $471.8 million.

The company said the assets available to meet non-insurance contract liabilities at Dec. 31, 2017 amount to $870.2 million, giving rise to a deficit of $1,153,400,000 in the available assets compared to the amounts due to the scheme noteholders and other creditors.

As a consequence of the deficit in net assets, Ballantyne said the class C notes were contractually written down, and, as a result of the deficit in value available to the scheme notes, there is no economic value attributable to the class B-1 notes and class B-2 notes.

Because of these issues, the company said it has experienced ongoing events of default as a result of being unable to pay scheduled interest in full on the scheme notes, which has triggered payments under the Ambac and Assured Guaranty Financial guarantees.

According to the release, it is proposed that the approval of the class A noteholders will be sought in two separate scheme meetings, including a meeting of holders of the Ambac guaranteed notes and a meeting of the holders of the class A-1 notes and the Assured guaranteed notes.

The company has appointed William Fry as its Irish legal adviser, Davis Polk & Wardell LLP as its New York legal adviser and PwC as its financial adviser.

Ballantyne is a Dublin, Ireland-based provider of reinsurance services.

© 2015 Prospect News.
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