CHICAGO - (Business Wire) Fitch Ratings has placed its ratings of Flagstone Reinsurance Holdings, Ltd. (NYSE:FSR) and subsidiaries (collectively Flagstone) on Rating Watch - Negative. A full list of ratings is included at the end of this release. Fitch's rating actions follow last week's announcement by Flagstone that it has made an offer to the board of IPC Holdings Ltd. (IPC) to acquire all of IPC's outstanding shares in a stock and cash transaction valued at $1.8 billion. Terms of the offer call for Flagstone to exchange approximately $1.5 billion of shares and $300 million of cash in exchange for IPC's outstanding common stock.
Fitch's decision to place Flagstone's ratings on Rating Watch Negative reflects uncertainty as to how combining the two companies' books of business will affect the resulting entities' risk profile and risk adjusted capitalization. From a competitive positioning standpoint, Fitch views the acquisition favorably as it believes that Flagstone will benefit from the combined entities' enhanced size and scale. Furthermore, the execution risks associated with the transaction are largely mitigated by Flagstone's familiarity with the property/catastrophe reinsurance market and IPC's short-duration reserves and comparatively small number of employees. As a result, if Fitch gains comfort with the combined entities' risk-adjusted capitalization, it is likely to affirm Flagstone's ratings.
IPC has received competing bids from other entities and as a result, Fitch views the state of Flagstone's bid as very fluid. If IPC's board accepts Flagstone's offer, Fitch expects to meet with Flagstone's management in the short term to discuss the effect of the transaction in greater detail. Conversely, if IPC were to reject Flagstone's offer, Fitch would remove the ratings from Rating Watch.
Fitch has placed the following ratings on Rating Watch - Negative:
Flagstone Reassurance Suisse SA:
--Insurer financial strength 'A-'.
Flagstone Reinsurance Holdings Limited
--Long-term Issuer Default Rating (IDR) 'BBB+';
--$120 million of floating-rate subordinated debentures due Sept. 15, 2036 'BBB-';
--Euro13 million of floating-rate subordinated debentures due Sept. 15, 2036 'BBB-';
--$25 million of floating-rate subordinated debentures due Sept. 15, 2037 'BBB-'.
Flagstone Finance S.A.
--Long-term IDR 'BBB+';
--$100 million of floating-rate subordinated debentures due July 30, 2037 'BBB-'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Mark Rouck, +1-312-368-2085 (Chicago)
Greg Dickerson, +1-212-908-0220
David Stephenson, +44 0207 682 7471 (London)
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brian.bertsch@fitchratings.com
