Exhibit 99.(c)(2)
Quanta Capital Holdings
This document is intended solely for the use of the party to whom FBR has provided it, and is not to be reprinted or redistributed without the permission of
FBR. All references to “FBR” refer to Friedman, Billings, Ramsey Group, Inc., and its predecessors and subsidiaries as appropriate. Investment banking,
sales, trading, and research services are provided by Friedman, Billings, Ramsey & Co., Inc. (FBR & Co.), except for those online offering, mutual fund
distribution and discount brokerage services provided by FBR Investment Services, Inc. (FBRIS), and those services in the U.K., Europe and elsewhere
outside the United States and Canada provided by Friedman, Billings, Ramsey International, Ltd. (FBRIL). FBR & Co. and FBRIS are broker-dealers
registered with the SEC and are members of the NASD. FBRIL, based in the U.K, is regulated by the Financial Services Authority. Asset management
services, including managed hedge funds, mutual funds, private equity and venture capital funds, are provided by FBR subsidiaries FBR Investment
Management, Inc. (FBRIM), FBR Fund Advisers, Inc., and Money Management Advisers, Inc., which are investment advisers registered with the SEC.
Mortgage lending and origination provided by First NLC Financial Services, LLC (FNLC).
On March 31, 2003, Friedman, Billings, Ramsey Group, Inc. merged with FBR Asset Investment Corporation (“FBR Asset”), a real estate investment trust
(“REIT”) managed by FBR prior to the merger. The merged company, Friedman, Billings, Ramsey Group, Inc. is structured as a REIT for U.S. Federal
Income Tax purposes and conducts its brokerage, sales and trading, investment banking, asset management and banking business through taxable REIT
subsidiaries.
This document is intended for information purposes only, and shall not constitute a solicitation or an offer to buy or sell, any security or services, or an
endorsement of any particular investment strategy. For additional important information, please visit our website, www.fbr.com.
CAUTIONS ABOUT FORWARD-LOOKING INFORMATION
This presentation and the information incorporated by reference in this presentation include forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Some of the forward-looking statements can
be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “plans,” “estimates” or
“anticipates” or the negative of those words or other comparable terminology. Statements concerning projections, future performance developments, events,
revenues, expenses, earnings, run rates, and any other guidance on present or future periods constitute forward-looking statements. Such statements
include, but are not limited to, those relating to the effects of growth, revenues and earnings, our principal investing activities, levels of assets under
management and our current equity capital levels. Forward-looking statements involve risks and uncertainties. You should be aware that a number of
important factors could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to,
the overall environment for interest rates, repayment speeds within the mortgage backed securities market, risk associated with equity investments, the
demand for public offerings, activity in the secondary securities markets, competition among financial services firms for business and personnel, the high
degree of risk associated with venture capital investments, the effect of demand for public offerings, mutual fund and 401(k) pension plan inflows or outflows
in the securities markets, volatility of the securities markets, available technologies, the effect of government regulation and of general economic conditions on
our own business and on the business in the industry areas on which we focus, fluctuating quarterly operating results, the availability of capital to us and risks
related to online commerce. We will not necessarily update the information presented or incorporated by reference in this presentation if any of these forward
looking statements turn out to be inaccurate. Risks affecting our business are described throughout our Form 10-K, especially in the section entitled “Risk
Factors.” The entire Form 10-K, including the Consolidated Financial Statements and the notes and any other documents incorporated by reference into the
Form 10-K, as well as, the Forms 10-Q and 8-K filed subsequent to the Form 10-K, should be read for a complete understanding of our business and the risks
associated with that business.
Cautionary Statement
1
Table of Contents
I.
Situation Overview
II.
Series A Preferred
III.
OMITTED
IV.
FBR
IV.
OMITTED
2
Situation Overview
3
Situation Overview
Quanta is considering its options pending permission from Bermuda to
release a significant amount of capital
Quanta currently has 3.1 million shares of Series A Preferred outstanding
with a stated 10.25% yield
No dividend payments have been made since 3/06
Quanta also has 2 pooled trust preferred issues outstanding
$40 million at 385 over 3-month LIBOR issued on 12/21/2004
$20 million at 350 over 3-month LIBOR issued on 2/24/2005
Interest payments have been deferred since 12/06
Quanta’s Board of Directors is considering the best use of proceeds with
regard to retiring the Series A Preferred, the pooled trust preferred issues,
or both
This presentation reviews and compares these options
SITUATION OVERVIEW
4
Series A Preferred
5
Trade History
Source: FactSet. Price history from 12/28/2005 to 4/9/2007.
First Class Action Lawsuit Filed
Against Quanta
J
Quanta Announces New Credit
Facility
H
Quanta Announces Third Quarter
2006 Financial Results
I
Quanta Files 2006 Annual Report
on Form 10-K
K
Quanta and Chaucer Formalize
Agreement To Create Pembroke
Managing Agency
G
Quanta Announces Second
Quarter 2006 Financial Results
F
Quanta and Chaucer Agree to
Create New Managing Agency
for Lloyd's Syndicate 4000
E
A.M. Best Downgrades and
Withdraws Ratings of Quanta
D
Quanta Announces Orderly Run-
off of Most Specialty Lines;
Quanta's Lloyd's Syndicate and
ESC Not Included in Run-off Plan
C
Quanta Issues Q4 2005 Loss
Guidance Below Analysts'
Expectations
B
A.M. Best Downgrades Ratings
of Quanta and Places the
Ratings Under Review With
Negative Implications
A
A
B
C
E
D
F
G
H
The Series A Preferred has been volatile since the company was downgraded,
but has realized some stability since Q3 earnings were released
I
J
K
SERIES A PREFERRED
6
FBR’s Trading Commitment
FBR has been a
leading trader in
Quanta’s Series A
Preferred Equity
Source: AutEx Block data. Trade volumes from 3/1/2006 to 4/4/2007.
SERIES A PREFERRED
FBR placed the Series A and has traded the vast majority of it
FBR is uniquely qualified to serve as tender manager
7
Trade Volume
Source: FactSet. Trade volumes from 3/1/2006 to 4/4/2007.
1.1 MM shares have traded between $16.00 and $18.00 since March 1, 2006
0.9 MM shares have traded between $18.00 and $20.00 since March 1, 2006
SERIES A PREFERRED
This chart indicates
the purchase price
ranges in which Series
A shares have been
purchased since
3/1/06 and is helpful
as we think about
potential tender prices
relative to where the
Series A has traded
8
Trailing 30 Day Average Trading Volume
Source: Bloomberg
SERIES A PREFERRED
The 30 day volume-weighted-average price is $19.34
With the exception of a
few large trades, this
issue has been and is
very thinly traded
9
Present Value of Preferred|INVESTOR PERSPECTIVE
$25.00 - Par
$25.25 - Change-of-control
$28.00 – Redemption after 5
year no-call period
Note: 1) Assumes no payout of preferred dividends over entire period of analysis
2) Discount rate varied from 8% (265 bps over 3-month LIBOR) to 14% (approximate
current yield of QNTA’s Series A Preferred)
The tables below show the present value of potential future payouts to preferred
holders over the next 4 years at 1 year intervals
After the 5 year no-call period, the redemption price is $28 per share declining
to $25 per share over five years
SERIES A PREFERRED
10
Present Value of Preferred|COMPANY PERSPECTIVE
If QNTA intends to forgo payment of preferred dividends and to call the
Series A Preferred at year end 2010, then QNTA should purchase shares
at prices up to $23.31
If QNTA intends to pay preferred dividends and to call the Series A
Preferred at year end 2010, then theoretically QNTA should purchase
shares at prices up to $31.41
SERIES A PREFERRED
Per Share ($)
Aggregate ($ 000)
Factors that could affect
pricing:
Any new litigation or
unforeseen changes to
current litigation
A large buyer trying to
establish a position has
the potential to materially
increase the current
market price
Momentum in the
tender offer process
11
Pricing Recommendation
Based on recent trading prices and trends, present value analysis and our
understanding of the holders, we recommend initiating a tender at
approximately $21.00 with room to increase the bid to the $22.00 - $22.50
range
The chart below shows the percent of preferred we would expect to be
tendered at various prices
Tender Price
SERIES A PREFERRED
12
Process Considerations
While the general theory is relatively simple and compelling, the execution of
this transaction will be very complicated with several moving pieces
Tender offer
Going private
Proxy
Bermuda law
Preferred security
Private purchases of the Series A are permissible and theoretically would be
possible ahead of a tender offer
However, we would strongly recommend against this approach
The private transactions would be subject to several rules and concerns
Lose ability to vote the shares / reduce momentum of tender offer process since low-hanging fruit is
no longer available
There could be no time table / time pressure in the private transactions
There would be no public solicitation
Concern with the possibility of ‘integrating’ the private purchases with an ensuing tender offer
SERIES A PREFERRED
13
Transaction Timeline
SERIES A PREFERRED
14
Transaction Timeline
SERIES A PREFERRED
15
FBR
20
Why FBR|UNIQUE SITUATION
There is nothing typical about the current situation or the potential tender
offer for the Series A
Run-off insurance company
Only 1 dividend paid to Series A holders
Release of capital is not certain
Bermuda law
Proxy process
FBR has a long track record of success in helping companies with difficult
and complex situations – situations that other capital markets participants
say are ‘impossible’
Initial capitalization
Preferred / common capital raise in December of 2005
FBR proposes using the investment banking team that managed the
common stock and Series A offerings in December of 2005 and helped
advise the company as it explored strategic alternatives in 2006 to execute
this transaction
This means that both outgoing and incoming calls will be handled by senior
investment bankers that are very knowledgeable with respect to all of the pertinent
issues. We have partnered with Quanta from its beginning. No firm could be better
positioned to understand the story and communicate it to the market as effectively as
FBR
FBR
21
Why FBR|KNOWLEDGE OF THE COMPANY
FBR is ideally situated to advise the company with regard to a tender offer
for its Series A Preferred Stock
Time is of the essence and FBR will be able to move more quickly than any
other firm given our familiarity with the situation and the company
Superior ability to communicate situation accurately to current holders of
the Series A Preferred Stock
Ability to manage an effective and efficient due diligence process resulting
in appropriate disclosures and ultimately a very ‘tight’ process
Established relationship with many members of senior management,
internal and external legal counsel and the Board of Directors
FBR
22
Why FBR|KNOWLEDGE OF INVESTORS
FBR placed the stock and has traded the majority of it since the offering
We have long-standing relationships with the current holders that will
facilitate productive conversations that would be difficult for another firm to
achieve even with knowledge of the current holders
Publicly available information with regard to the holders of the Series A
Preferred is extremely limited
FBR has proprietary data with respect to the current owners of the preferred which
makes us the best investment bank to manage Quanta’s tender offer
Source: FactSet
FBR
23
Common Stock Holders
Source: FactSet
FBR
24
Proposed Terms
$1.0 million
Success fee:
$350k – to be credited against success fee
Non-refundable retainer:
$500k – additional to success fee if 75% or more of
preferred is tendered
Incentive based fee:
Reasonable out-of-pockets including legal to be
reimbursed by the company
Expenses:
FBR
25
Boston
100 Federal Street, 29th Floor
Boston, Massachusetts 02110
617.757.2900
Dallas
2100 McKinney Avenue, Suite 1940
Dallas, Texas 75201
469.341.1200
Houston
600 Travis Street, Suite 6070
Houston, Texas 77002
713.343.1000
Irvine (Los Angeles)
18101 Von Karman Ave., Suite 950
Irvine, California 92612
949.477.3100
New York
299 Park Avenue, 7th Floor
New York, New York 10171
212.457.3300
Phoenix
2555 East Camelback Rd., Suite 180
Phoenix, Arizona 85016
602.794.3700
San Francisco
4 Embarcadero Center, Suite 1950
San Francisco, California 94111
415.248.2900
London, UK
8th Floor, Berkeley Square House
Berkeley Square
London WIJ 6DB
011.44.20.7409.5300
Friedman Billings Ramsey Group, Inc.
Metropolitan Washington, D.C. Headquarters
1001 Nineteenth Street North . Arlington, Virginia 22209
Tel: 703.312.9500 . Fax: 703.312.9501 . www.fbr.com
NOTE: Not all services are available from all offices.
28