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$600 Million Equity Investment
Transaction Presentation
November 27, 2006
Safe Harbor
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o This presentation contains certain forward looking statements within the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These statements include information with respect to our financial
condition, our results of operations and businesses and the expected impact
of this offering on our financial condition. These forward looking
statements are not guarantees of our future performance and are subject to
risks and uncertainties that could cause actual results to differ
materially from the results contemplated by the forward looking statements.
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Executive Summary
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o MassMutual Capital and affiliates of Cerberus (together, the "New
Investors") have agreed to a $600 million investment in Scottish Re (the
"Company") representing approximately 68.8%(1) ownership of the Company and
majority control of the Board
o Other aspects of the transaction package include:
- The New Investors have agreed to provide a $100 million bridge
facility to ensure adequate liquidity through closing
- The New Investors have arranged for commitments on a long term, $500
million XXX financing facility that will fund 2005 and 2006 Scottish
Re new business production
- The investment has the support of other critical third party
constituents
o Scottish Re has the ability to pay the $115 million 4.5% convertible notes,
which can be put to the Company on December 6, 2006
o This concludes the board of directors process to evaluate strategic
alternatives
o
(1) At the time of investment, assuming the Hybrid Capital Units ("HyCUs")
are converted into 7.44 million shares in February 2007
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Executive Summary (Cont.)
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o The New Investors consider Scottish Re to be a long-term investment
- The objective is for the Company to operate profitably with
sustainable operations, liquidity and capital
- The equity injection will remain as permanent capital even if the New
Investors decide to sell their shares
- The New Investors are under no pressure to monetize their investment
o The New Investors believe the investment will be positive for all of
Scottish Re's constituents
- Solves near-term and long-term liquidity issues
- Provides permanent equity capital and reduces financial leverage
- Improves the Company's credit profile
- Allows management to refocus on the day-to-day operations of the
business
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MassMutual Overview
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o Business Description
- Founded in 1851, Massachusetts Mutual Life Insurance Company
("MassMutual") is a mutually owned financial protection, accumulation
and income management company headquartered in Springfield,
Massachusetts. MassMutual Financial Group is the fleet name for
MassMutual and its affiliates, with more than 13 million clients and
over $395 billion in assets under management at year end 2005
- MassMutual's asset management subsidiaries include Babson Capital
Management, Baring Asset Management, OppenheimerFunds and Cornerstone
Real Estate Advisers
- MassMutual has operations in the U.S., Hong Kong, Taiwan, Japan,
Luxembourg and Chile
- MassMutual Capital Partners LLC ("MassMutual Capital") is a limited
liability company created by MassMutual to focus on strategically
investing in business opportunities as a means of optimizing the value
of the enterprise on behalf of MassMutual and other investors
o MassMutual Financial Strength Ratings
- S&P AAA
- Moody's Aal
- Fitch AAA
- A.M. Best A++
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Cerberus Overview
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o Business Description
- Established in 1992, Cerberus Capital Management, L.P. ("Cerberus") is
one of the world's leading private investment firms with approximately
$22 billion under management in funds and accounts
- Through its team of more than 275 investment and operations
professionals, Cerberus specializes in providing both financial
resources and operational expertise to help transform undervalued
companies into industry leaders for long-term success and value
creation
- Cerberus is headquartered in New York City, with offices in Chicago,
Los Angeles, and Atlanta, as well as advisory offices in London,
Baarn, Frankfurt, Tokyo, Osaka and Taipei
o Representative investments in the financial services sector include:
- Aegis Mortgage
- AerCap Aviation Solutions
- Aozora Bank Ltd.
- Bank Leumi Le-Israel BM
- EntreCap Financial Corporation
- General Motors Acceptance Corp. (close pending)
Green Tree Servicing
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Key Investment Terms
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Issuer o Scottish Re Group Limited ("SCT")
Investors o MassMutual and Cerberus (together,
the "New Investors")
Securities o 1 million convertible cumulative
Offered participating preferred shares of
SCT, par value of $0.01, and
liquidation preference of $600 per
share (the "Convertible Preferred
Shares")
Ranking o Rank senior only to SCT Ordinary
Shares and subordinate to SCT's
current senior securities
(including other preferred
securities)
Dividends; o Dividends accrete on the
Accretion Convertible Preferred Shares at a
rate of 7.25% per annum
Conversion Rights o Convertible Preferred Shares are
convertible, at the option
of the holder, in whole or in part,
into 150 million Ordinary Shares.
This amount will not increase due
to the accretion of dividends
Mandatory o Automatically converts on the ninth
Conversion anniversary
Voting Rights o Same voting rights as SCT Ordinary
Shares on an "as converted" basis
Board Control o New Investors will appoint six of
the eleven directors (with three
each to be appointed by MassMutual
and Cerberus) and will nominate
three independent directors, the
CEO, and a designee of The Cypress
Group to the Board
Ownership Post-Investment
MassMutual Common
Capital Cerberus Shareholders
- ---------- -------- ------------
| | |
| | |
| | |
--------- --------- |
| | | approx.
50% | | 50% | 31.2%(1)
| | |
V V |
Convertible |
Preferred |
Shares |
| |
| approx. 68.8% (1) |
| |
V V
SCT
Scottish Re Group Ltd.
(1) At the time of investment, assuming the Hybrid Capital Units ("HyCUs")
are converted into 7.44 million Ordinary Shares in February 2007
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Investment Benefits to Scottish Re Shareholders
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o Financial resources will be significantly improved
o Enhanced liquidity, leverage and capital position
o Without this investment and ancillary financing commitments, the
Company may not have been able to continue operations in its current
form
o Enables Scottish Re's competitive position to improve as it regains its
stature and credit profile
o Allows Scottish Re access to more diverse sources of funding
o Management team will focus on day-to-day operations
o Capital will be allocated to markets where the best long-term business
opportunities exist
o The New Investors can bring substantial value to the Company through their
sponsorship, including industry and operational expertise
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Business Strategy
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o Scottish Re's primary strategic objective will be to reconfirm its status
as a profitable provider of life reinsurance solutions and services
o Scottish Re and the New Investors are committed to restoring market
confidence by consistently growing earnings and maintaining a conservative
credit profile
o Scottish Re and the New Investors believe that the best opportunity to
maximize shareholder value is to:
o Allow management to focus on day-to-day operations and writing new
business
o Mitigate ratings and capital constraints on the business
o Continue to strengthen enterprise risk management systems, enhance IT
infrastructure and bolster operating teams
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Next Steps
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o The transaction is subject to approval by the holders of 66 2/3% of
Scottish Re's outstanding ordinary shares entitled to vote at the special
meeting
o Proxy voting cards will be mailed to all shareholders within approximately
45 days
o The close of the transaction is subject to customary closing conditions,
including regulatory approvals
o The transaction is expected to close as early as the second quarter of 2007
o Scottish Re will continue to operate its business under its current
structure, and will remain traded on the New York Stock Exchange under
ticker "SCT"
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Additional Information and Where to Find it
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o This press release may be deemed to be solicitation material in respect of
the private placement of Convertible Preferred Shares of Scottish Re. In
connection with the proposed transaction, Scottish Re plans to file a proxy
statement with the SEC. INVESTORS AND SECURITY HOLDERS OF SCOTTISH RE ARE
ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The final
proxy statement will be mailed to shareholders of Scottish Re. Investors
and security holders may obtain a free copy of the proxy statement, when it
becomes available, and other documents filed by Scottish Re with the SEC,
at the SEC's web site at http://www.sec.gov. Free copies of the proxy
statement, when it becomes available, and Scottish Re's other filings with
the SEC may also be obtained from Scottish Re. Free copies of Scottish Re's
filings may be obtained by directing a request to Scottish Re Group
Limited, Post Office Box HM 2939, Hamilton, HM MX, Bermuda, Attention:
Secretary.
o Scottish Re and its respective directors, executive officers and other
members of its management and employees may be deemed to be soliciting
proxies from Scottish Re's shareholders in favor of the proposed
transaction. Information regarding Scottish Re's directors and executive
officers is available in Scottish Re's proxy statement for its 2006 annual
meeting of shareholders, which was filed with the SEC on April 4, 2006.
Additional information regarding the interests of such potential
participants will be included in the proxy statement and the other relevant
documents filed with the SEC when they become available.
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