Oil Casualty Insurance Ltd. has announced the completion of its Dutch Auction tender offer to repurchase notes from the stricken Avalon Re catastrophe bond from its investors. They launched the repurchase offer with the aim of buying back up to $50m worth of notes for $42.5m. The offer was due to have closed on the 21st August, but OCIL extended it and so it finally closed on the 4th September. At the end of the Dutch auction period OCIL have managed to buy back $7.012m worth of the Class B variable rate notes, not quite the volume they were looking to repurchase. This leads us to believe the extension was due to the lack of interest and an attempt to secure more volume.
We still don’t have a totally clear picture as to why OCIL undertook the tender offer. As we wrote in our earlier post on this subject we suspect that either there is still value in owning the notes, as the losses aren’t as bad as predicted, or that a default is ahead and OCIL see it as simpler to handle the losses themselves.
You can read the full details on the ending of the Dutch auction in this press release from OCIL.