SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 18, 2002
Trenwick America Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-31967 06-1087672
State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
One Canterbury Green
Stamford, Connecticut 06901
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 353-5500
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. - Other Events
On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
the operating subsidiaries of Trenwick Group Ltd. ("Trenwick") as follows:
Prior Rating New Rating
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Trenwick America Reinsurance Corporation A- B+
The Insurance Corporation of New York A- B+
Dakota Specialty Insurance Company A- B+
Trenwick International Limited A- B+
Chartwell Insurance Company A- B
LaSalle Re Limited B++ B+
The above A.M. Best Company ratings remain under review with negative
implications.
The reduced A.M. Best Company ratings may adversely affect the ability of
Trenwick's operating subsidiaries to continue to underwrite the types of
insurance and reinsurance business that they have underwritten in the past.
The reduced A.M. Best Company ratings also constitute an event of default under
the Credit Agreement among Trenwick America Corporation, Trenwick Holdings
Limited and various financial institutions. Trenwick Holdings Limited is the
account party on $226 million of letters of credit issued under the Credit
Agreement in support of Trenwick's underwriting operations at Lloyd's, London.
Trenwick has guaranteed the obligations of Trenwick America Corporation and
Trenwick Holdings Limited under the Credit Agreement.
Unless there is a waiver of the event of default under the Credit Agreement,
under the terms of its guaranty Trenwick is prohibited from declaring or paying
any dividends on the following outstanding securities:
o Trenwick common shares;
o Trenwick Series B Cumulative Convertible Perpetual Preferred Shares;
o LaSalle Re Holdings Limited Series A Preferred Shares; and
o Trenwick Capital Trust I 8.82% Subordinated Capital Income
Securities.
In addition, Trenwick is not allowed to redeem or repurchase its capital stock
so long as the event of default under the Credit Agreement continues.
The event of default under the Credit Agreement also permits the letter of
credit providers to demand that the $226 million outstanding letters of credit
be secured with an equal amount of cash. At this time, Trenwick does not have
sufficient available liquidity to provide the necessary cash collateral if the
letter of credit providers demand it.
The continuation of an event of default under the Credit Agreement, the
restrictions on Trenwick's ability to pay dividends and the potential demand for
cash collateral by the
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letter of credit providers may cause additional events of default to occur under
the instruments governing the outstanding indebtedness and preferred shares of
Trenwick and its subsidiaries.
Trenwick is currently in discussion with the letter of credit providers
regarding the current event of default and letter of credit financing for
Trenwick's participation at Lloyd's for the 2003 underwriting year. If the event
of default is not waived, the letters of credit are not renewed for the 2003
Lloyd's underwriting year or the letter of credit providers demand cash
collateral, there is substantial doubt as to Trenwick's ability to continue
underwriting at Lloyd's or continue as a going concern. Trenwick and/or one or
more of its subsidiaries may be forced to seek protection from creditors through
proceedings commenced in Bermuda and other jurisdictions including the United
States.
SIGNATURE
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRENWICK AMERICA CORPORATION
By: /s/ Stephen H. Binet
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Stephen H. Binet
President and
Chief Executive Officer
Dated: October 25, 2002
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