Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
They had £220m wiggle room between current mcap and the original estiamtes of NAV post sale
And that’s
“Adjusted for closing of the Sale and subsequent de-leveraging of R&Q assuming Available Net Cash Proceeds of $170 million (at the lower end of the expected range)”
Not much has changed since the deal announced in October, interest rates have only moved a quarter %.
In the Presentation, R&Q provides an associated plan for the R&Q Legacy business, although it should be stressed that the ability of R&Q Legacy to achieve such objectives depends on many factors, including not least a successful closing of the Sale and the paydown of R&Q debt. This plan includes that:
The refocused business and strategy is expected to deliver operating profitability by full year 2025
Fee income is targeted to be doubled in 2025 compared to H1 2023 annualised
Expenses are anticipated to be reduced by 15% to 20% in 2025 relative to an adjusted annualised H1 2023 expense base that includes certain assumptions around Legacy’s standalone cost structure
As R&Q returns to profitability, it will review its dividend policy, subject to constraints due to relationships with lenders, regulators and preferred shareholders
The Presentation also outlines R&Q’s expectation of $100m+ of cumulative surplus capital to be generated over the next ~5 years as claims payments are made, releasing capital held against reserves. This is in addition to the estimated $40m - $80m of additional collateral R&Q will be required to hold against existing legacy exposure retained by Accredited, which R&Q expects to be released and available over the next 5+ years as the underlying exposures are reduced and eliminated.
I’m fairly convinced that the remaining business which will be more like what the company looked like at end 2021 (when it had $400m reserves under management and market valued it at ~170/share) will be worth more than what the current market values it.
“Reserves Under Management at year-end 2023 are circa $1 billion. This will reduce by circa $670 million following the sale of the Corporate Liabilities Joint Venture.“
Im not sure, will the remaining business (once JV and accredited is sold) as of year end, have ~$330m under management? Or is this just what’s left in Legacy and more elsewhere?
If so that last sale pretty much (-85%) completes the transferring of reserves and move to a more fee originated based model, and removal of most liabilities
Don’t forget there are other interested parties, the sale involved :
94 counter parties approached
59 entered NDAs
16 non binding offers first round
9 went to second round
4 non binding offers at second round
Onex bid was chosen from the lot.
The sale docs also mention potential risks from a take over approach before sale completion.
It’s getting there, aslong as RQ keep on top of it then and all is as they have RNS’d the. It should happen, the sale has a pledge held over $465m Onex shares so they can’t walk away, and Onex want the $100m / year accredited is going to generate, Onex need to be seen to grow and replace their AUM and Accredited is a steel at the sale price for them.
Downside is IF the sales don’t complete they wind the business down as they won’t have the required A- or above credit rating to operate in US.
Nothing in life is free. But the potential Risk/reward here is a 10+ to 1 bet.
If all goes to plan the slimmed down company will be a good asset to keep or sell, eventually potentially returning multiples of current mcap to equity holders over many years.
Just a matter of time.
R&Q Insurance Holdings Ltd
Appointment of Non-Executive Directors
19 April 2024
R&Q Insurance Holdings Ltd (AIM-RQIH) ("R&Q" or the "Group") announces the appointments to the Board of Stephen Welch and Lawrence Hirsh as Non-Executive Directors, effective from 18 April 2024.
Stephen Welch has worked for financial sponsors and investors in both executive and non-executive roles. He has extensive experience managing complex corporate issues, including several restructuring situations of regulated financial services and insurance businesses. Stephen is also a Non-Executive Director of Telegraph Media Group Limited, The Spectator (1828) Limited and the Primary Group Limited. Stephen was a partner at McGrathNicol and a Senior Managing Director at FTI Consulting, and is a Chartered Accountant.
Lawrence Hirsh has acted as an independent board member and advisor to a number of companies, providing financial and operational services. Lawrence was previously a Managing Director for Alvarez & Marsal, leading its Southeastern US Corporate Restructuring Practice, and a Partner at Arthur Andersen LLP. As both an advisor and during his career, Lawrence has a track-record of helping drive operational improvements and cost reduction programs.
Jeff Hayman, Chairman of R&Q, said: "Stephen and Lawrence both bring relevant additional experience to the Board, in particular with regards to our priorities of reducing debt and improving the efficiency and expense base of the go-forward business. As we continue to work towards completing the sale of Accredited, these appointments also support our ongoing discussions with lenders to achieve their necessary approvals."
R&Q Legacy also expects to have the ability to release a significant amount of capital over the next 5 years
and generate incremental investment income. R&Q Legacy expects over $100 million of cumulative surplus
capital to be generated as claims payments are made, thus releasing capital held against reserves. This is
in addition to the estimated $40 million to $80 million of additional collateral R&Q Legacy will be required to
hold against existing legacy exposure retained by Accredited, which R&Q Legacy expects to be released
and available over the next few years as the underlying exposures are reduced and eliminated.
Mr Bradbrook is currently engaged as the Chief Accounting Officer for the R&Q Group pursuant to a service
agreement with R&Q Central Services Limited. Mr Bradbrook receives a fixed basic annual salary of
US$360,000 payable monthly in arrears and his service agreement is terminable by either party on six months’
written notice. Mr Bradbrook may be entitled to be paid bonuses of such amounts (if any) at such times and
subject to such conditions as the Company’s remuneration committee may in its absolute discretion decide.
In addition, Mr Bradbrook is guaranteed a bonus payment of $201,600 in April 2024.
Sales doc :
bargain.
"Mr Hayman has agreed, subject to contract, to enter into a service agreement with the Company pursuant
to which he will be employed as Interim Chief Executive Officer of R&Q Legacy for a fixed basic annual
salary of US$600,000 payable monthly in arrears. There is no entitlement to a bonus. Mr Hayman will be
subject to customary restrictive covenants during and after the term of the agreement. Mr Hayman’s
appointment will be finalised upon Closing of the Accredited sale and the remaining terms and conditions
will be agreed prior to then."
Numbers pre asset sale as of June 23 interim, plenty of long term finance in place and shows plenty room for more profit for new buyers if using cash raised from equity and debt cleared
The total amounts owed to credit institutions at 30 June 2023 was $333.3m (31 December 2022: $344.9m).
The Group has issued the following debt:
Issuer
Principal
Rate
Maturity
R&Q Insurance Holdings Ltd.
$70,000k
6.35% above USD LIBOR*
2028
R&Q Insurance Holdings Ltd.
$125,000k
6.75% above USD LIBOR**
2033
Accredited Insurance (Europe) Limited
€20,000k
6.7% above EURIBOR
2025
Accredited Insurance (Europe) Limited
€5,000k
6.7% above EURIBOR
2027
R&Q Re (Bermuda) Limited
$20,000k
7.75% above USD LIBOR
2023
Revolving Credit Facility
£59,327k
Variable
Revolving
Bank Term Loan
£12,500k
SONIA - 5 NCCR LAG
2024
* USD LIBOR Capped at 3.65% through December 2023
** USD LIBOR capped at 2%
The Group's subsidiary, Accredited Holding Corporation, provides a full and unconditional guarantee for the payment of principal, interest and any other amounts due in respect of the $70.0m Notes issued by R&Q Insurance Holdings Ltd.
Cash and investments
Our Cash and Investments at 30 June 2023, excluding funds withheld, was $1.5 billion. We produced a book yield, which excludes net realised and unrealised gains on fixed income assets, of 2.8%, an increase of 80 bps compared to H1 2022, due to the higher interest rate environment.