Tower has had its credit ratings placed under review by ratings agency AM Best following the announcement of its proposed $197 million takeover by Fairfax Financial, it was revealed today.
In a statement, AM Best said it had ‘placed under review with developing implications the financial strength rating of A- (Excellent) and the long term issuer credit rating (ICR) of “a-” of Tower Insurance Ltd.
It had also done the same with the long term ICR of “bbb-” of Tower Insurance Ltd’s parent company Tower Ltd.
“The credit rating actions follow the announcement that Tower Ltd and Fairfax Financial Holdings Ltd have entered into an agreement under which Fairfax will acquire 100% of Tower Ltd shares at $1.17 per share, for an aggregate purchase price of $197 million,” AM Best said.
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“The ratings will remain under review until the close of the transaction, and until AM Best completes its discussions with the Fairfax management team.
“Any potential rating impact from actual or anticipated changes to Tower Ltd’s and Tower Insurance Ltd’s credit profiles also will be assessed.
“Additionally, AM Best will factor its view of the extent of Fairfax’s financial support into the final rating determination.”
Tower released its own statement to the market following the AM Best announcement with company chairman Michael Stiassny saying the rating action was expected.
“An out-of-cycle rating review is standard business practice in the event a company is in play,” he said.
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