Yesterday, a judge in the United States Bankruptcy Court for the Southern District of New York granted Markel CATCo’s petition for Chapter 15 bankruptcy recognition and relief for the proposed buyout process for the final winding down of the CATCo retrocessional reinsurance funds.
Chapter 15 bankruptcy proceedings are typically applied to a foreign entity that touches on US financial interests, or has assets or businesses in the US.
Bankruptcy filings offer an element of protection for those involved in a winding down of an entity, such as Markel CATCo and its retrocessional reinsurance investment funds, with their proposed buyout proceedings and scheme of arrangement.
It’s supposed to reduce the risk for creditors, ring-fencing the process and protecting it against litigation as well, in the hopes of enabling the return capital to investors to be as smooth as possible.
Yesterday’s hearing saw Judge Beckerman considering the chapter 15 recognition petitions, which we covered here when they were originally filed.
No objections were raised to the Chapter 15 application and Judge Beckerman granted the relief as requested.
As a result, the judge entered an order to recognise the Bermuda proceedings as the foreign main proceedings in the liquidation, to enforce an automatic stay in the territorial jurisdiction of the United States and to recognise the joint provisional liquidators as representatives of the CATCo Group Companies in the chapter 15 cases, giving them full authority to administer the group’s assets in the United States.
Also, this recognition order extends the moratorium on claims against the CATCo Group Companies to the United States, which is designed to protect the process, while further aiding the implementation of the proposed buy-out transaction, Markel CATCo said.
Whether this will protect Markel CATCo from claims in other jurisdictions, or from investors that haven’t signed up to its buyout proposal, is not immediately clear.
As we explained yesterday, Pension Insurance Corporation plc (PIC) said it won’t accept the updated and improved buyout terms proposed to investors in the Markel CATCo Investment Management retrocessional reinsurance investment funds, calling the proposal “fundamentally flawed”.
But, from Markel CATCo’s side, having the Chapter 15 bankruptcy relief granted is another step towards the resolution it is seeking.
As a reminder Markel Corporation and Markel CATCo made an offer to buyout the remaining holdings in its retro reinsurance investment fund strategies back in September.
Pension Insurance Corporation plc (PIC) then said that it intended to try and put together an investor group to challenge Markel CATCo’s proposed buyout scheme, saying it believed it will “drastically undervalue the interests of investors.”
Following that, the buyout terms being offered by Markel CATCo were updated recently and made more favourable in response to investor feedback.
As we then explained, the updated terms mean that investors in the CATCo retro funds now stand to receive as much as 18.5% more in capital return, compared to the original offer that was made.