Enstar Group has entered into amended and restated agreements in connection with its merger with a private equity entity, adjusting certain financial covenants tied to the $5.1 billion acquisition price.
According to a filing with the US Securities and Exchange Commission, the modifications reset the calculation of the Bermuda-based insurer's minimum consolidated net worth.
The updated agreements will now test compliance with financial covenants on the last day of each fiscal quarter, a report from AM Best said. The minimum consolidated net worth covenant, previously set at $4.3 billion, will now be replaced with an amount equal to the greater of $3 billion, according to the filing.
The amendments involve a credit agreement between Enstar, as borrower and guarantor, and National Australia Bank Ltd. (NAB), which serves as the administrative agent and a lender. The changes also include an amended and restated letter of credit facility agreement, in which Enstar is the guarantor and its wholly owned subsidiary, Cavello Bay Reinsurance Ltd, is the borrower.
The letter of credit agreement involves NAB, acting as administrative agent, along with several other issuing banks and lenders.
These changes were made in conjunction with Enstar's late July merger agreement with Elk Bidco Ltd and other parties. The agreement outlines a series of mergers in which Enstar will survive as a wholly owned subsidiary of its parent company.
Enstar’s filing indicates that the amendments to the underlying debt agreements will take effect before the deal’s closing, including revisions to the definition of "change of control" and updates to certain covenants to accommodate the post-transaction ownership structure.
Enstar’s “go-shop” period, which allowed the company to solicit competing acquisition offers, expired on Sept. 2. During this 35-day period, Enstar reached out to 34 potentially interested third parties, but none submitted a competing proposal to Sixth Street’s $5.1 billion offer, according to the company.
Assisted by Goldman Sachs & Co, Enstar sought alternatives before agreeing to the acquisition offer, which includes participation from Liberty Strategic Capital, J.C. Flowers & Co. LLC, and other institutional investors. The acquisition agreement was first announced in late July.
Once the transaction is finalized, Enstar is expected to continue its operations and strategy as a privately held company. The deal is anticipated to close by mid-2025.
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