SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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) - March 17, 2003
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TRENWICK GROUP LTD.
(Exact name of registrant as specified in its charter)
Bermuda 1-16089 98-0232340
(State or other jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
LOM Building, 27 Reid Street
Hamilton, HM 11, Bermuda Not Applicable
(Address of principal executive offices) (Zip Code)
(441) 292-4985
(Registrant's telephone number, including area code)
None
(Former name or address, if changed since last report)
Item 5. Other Events.
The Credit Agreement and Guaranty
Trenwick America Corporation, Trenwick Holdings Limited and Trenwick UK
Holdings Limited, each a subsidiary of Trenwick Group Ltd. ("Trenwick"), entered
into a Fifth Amendment to the Credit Agreement, dated as of January 16, 2003
(the "Fifth Amendment"), with certain lending institutions (the "Banks") party
to the Credit Agreement dated as of November 24, 1999 and amended and restated
on September 27, 2000 (the "Credit Agreement"), Wachovia Bank, National
Association, as Syndication Agent, Fleet National Bank, as Documentation Agent,
and JPMorgan Chase Bank ("JPMorgan"), as Administrative Agent. In connection
with the Fifth Amendment, Trenwick and the Banks entered into a Fifth Amendment
and Consent to the Holdings Guaranty, dated as of January 16, 2003 (the "Fifth
Guaranty Amendment and Consent"), which amends the Holdings Guaranty, dated as
of September 27, 2000 (the "Holdings Guaranty"), between Trenwick and JPMorgan,
as Administrative Agent.
The Fifth Amendment and the Fifth Guaranty Amendment and Consent, by
enumerating additional expenditures in the definition of "Specified
Expenditures" under the Credit Agreement and the Holdings Guaranty, expands the
list of expenditures which Trenwick and its subsidiaries may make without first
obtaining the written consent of the Banks. The Fifth Guaranty Amendment and
Consent (i) adds covenants to the Holdings Guaranty requiring Holdings to
deliver to the Banks monthly reports concerning intercompany transfers and
payments of restructuring fees and (ii) amends the covenant restricting the
incurrence of liens. Under the Fifth Guaranty Amendment and Consent, the Banks
consented to Holdings selling its investment in Florida Intracoastal
Underwriters, Limited Company for not less than approximately $8.0 million and
subject to other limitations. In addition, the Fifth Amendment makes other
technical and clarifying amendments to the Credit Agreement.
The description herein of the Fifth Amendment and the Fifth Guaranty
Amendment and Consent is qualified in its entirety by reference to the full text
of the Fifth Amendment and the Fifth Guaranty Amendment and Consent, copies of
which are attached hereto as Exhibits 99.1 and 99.2, respectively, and are
incorporated herein by reference.
Trenwick America Corporation, Trenwick Holdings Limited and Trenwick UK
Holdings Limited entered into a Sixth Amendment and Waiver to the Credit
Agreement, dated as of January 27, 2003 (the "Sixth Amendment and Waiver"), with
the Banks, Wachovia Bank, National Association, as Syndication Agent, Fleet
National Bank, as Documentation Agent, and JPMorgan, as Administrative Agent. In
connection with the Sixth Amendment and Waiver, Trenwick and the Banks entered
into a Sixth Amendment and Consent to the Holdings Guaranty, dated as of January
27, 2003 (the "Sixth Guaranty Amendment and Consent").
Pursuant to the Sixth Amendment and Waiver and the Sixth Guaranty
Amendment and Consent, a certain negative covenant concerning intercompany
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indebtedness was amended and any default that may have arisen as a result of any
previous failure of Trenwick to comply with this negative covenant was waived.
Under the Sixth Guaranty Amendment and Consent, the Banks consented to Holdings
making a one-time cash payment to Mr. James F. Billett, Jr. in an amount not
exceeding $2.7 million pursuant to an agreement between Trenwick and Mr. Billett
(the "Billett Agreement") concerning certain employment and post-employment
matters. The description of the Billett Agreement is qualified in its entirety
by reference to the full text of the Billett Agreement, a copy of which is
attached hereto as Exhibit 99.3 and is incorporated herein by reference.
In addition, the Sixth Amendment and Waiver and Sixth Guaranty Amendment
and Consent made other technical and clarifying amendments to the Credit
Agreement and Holdings Guaranty, respectively.
The description herein of the Sixth Amendment and Waiver and the Sixth
Guaranty Amendment and Consent is qualified in its entirety by reference to the
full text of the Sixth Amendment and Waiver and the Sixth Guaranty Amendment and
Consent, copies of which are attached hereto as Exhibits 99.4 and 99.5,
respectively, and are incorporated herein by reference.
Trenwick America Corporation, Trenwick Holdings Limited and Trenwick UK
Holdings Limited entered into a Seventh Amendment and Waiver to the Credit
Agreement, dated as of March 7, 2003 (the "Seventh Amendment and Waiver"), with
the Banks, Wachovia Bank, National Association, as Syndication Agent, Fleet
National Bank, as Documentation Agent, and JPMorgan, as Administrative Agent. In
connection with the Seventh Amendment and Waiver, Trenwick and the Banks entered
into a Seventh Amendment to the Holdings Guaranty, dated as of March 7, 2003
(the "Seventh Guaranty Amendment").
Pursuant to the Seventh Amendment and Waiver and the Seventh Guaranty
Amendment, the Banks waived certain defaults under the Credit Agreement and the
parties amended certain of the related affirmative and negative covenants as
follows:
(i) waived any default that arose as a result of the failure of Trenwick
to provide its annual plan and budget to the Banks for fiscal year 2003 by
February 15, 2003, provided that such information is provided as promptly as
possible and in no event later than March 15, 2003;
(ii) waived any default that may have arisen as a result of certain
compensation payable to certain employees pursuant to specified employment and
retention bonus agreements, and amended the applicable covenant to allow such
compensation under those agreements, subject to certain restrictions;
(iii) waived any default that may have arisen as a result of the failure
of Trenwick to maintain certain required minimum levels of statutory surplus and
tangible net worth, and amended the applicable covenants to lower such minimum
levels;
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(iv) waived any default that may have arisen as a result of making certain
payments in excess of $100,000 without the prior written consent of the Banks,
and amended the definition of "Specified Expenditures" under the Credit
Agreement and Holdings Guaranty to expand the list of expenditures which
Trenwick and its subsidiaries may make without first obtaining the written
consent of the Banks;
(v) waived any default that may have arisen as a result of Trenwick's
failure to deliver the executed Pledge Agreements, Subsidiary Guaranties, U.S.
Security Agreements, Foreign Security Agreements, and Warrant Agreement (each as
defined in the Credit Agreement) within the time periods specified, and amended
the applicable covenants to extend such time periods;
(vi) waived any default that may have arisen as a result of writing
certain errors and omissions insurance coverage at Lloyds, and amended the
applicable covenant to allow such coverage to the extent such business is
incidental to policies issued to certain financial institutions in accordance
with existing underwriting practices; and
(vii) waived any default that may have arisen as a result of the failure
to replace, refinance or restructure on or before March 1, 2003 the 6.70% senior
notes of Trenwick America Corporation due April 1, 2003, with such waiver to
continue through March 14, 2003 (which date was subsequently extended on March
14, 2003 to March 21, 2003 as described below).
The Seventh Guaranty Agreement also (i) adds a requirement under the
Holdings Guaranty that Trenwick deliver to the Banks a monthly report of all
Specified Expenditures made during such month and (ii) amends a negative
covenant thereby permitting Trenwick to liquidate certain listed subsidiaries.
In addition, the Seventh Amendment and Waiver and the Seventh Guaranty Agreement
make other technical and clarifying amendments to the Credit Agreement and
Seventh Guaranty Agreement, respectively.
The description herein of the Seventh Amendment and Waiver and the Seventh
Guaranty Amendment is qualified in its entirety by reference to the full text of
the Seventh Amendment and Waiver and the Seventh Guaranty Amendment, copies of
which are attached hereto as Exhibits 99.6 and 99.7, respectively, and are
incorporated herein by reference.
Trenwick America Corporation, Trenwick Holdings Limited and Trenwick UK
Holdings Limited entered into a Fourth Waiver to the Credit Agreement, dated as
of March 14, 2003 (the "Fourth Waiver"), with the Banks, Wachovia Bank, National
Association, as Syndication Agent, Fleet National Bank, as Documentation Agent,
and JPMorgan, as Administrative Agent. Pursuant to the Fourth Waiver, the Banks
waived any default that may have arisen as a result of the failure to replace,
refinance or restructure on or before March 1, 2003 the 6.70% senior notes of
Trenwick America Corporation due April 1, 2003, with such waiver to continue
through March 21, 2003.
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The description herein of the Fourth Waiver is qualified in its entirety
by reference to the full text of the Fourth Waiver, a copy of which is attached
hereto as Exhibit 99.8 and is incorporated herein by reference.
Series B Shares
Trenwick's Series B Cumulative Perpetual Preferred Shares (the "Series B
Shares") are convertible into common shares of Trenwick after five years or upon
the occurrence of a "special conversion event" at the greater of book value or
the average thirty-day trading price of common shares. One of the special
conversion events is the failure of Trenwick to maintain a GAAP net worth (as
defined in the Certificate of Designation with respect to the Series B Shares)
equal to at least $225 million for a period of more than sixty days ("Net Worth
Conversion Event"). On February 20, 2003, Trenwick delivered a notice to
European Reinsurance Company of Zurich ("European Re"), the holder of all of the
550,000 Series B Shares issued and outstanding, informing European Re that
Trenwick's GAAP net worth had fallen below $225 million. In the event that
Trenwick's GAAP net worth fails to equal or exceed $225 million on or before
April 21, 2003 (the date which is sixty days after the date of such notice), a
Net Worth Conversion Event will have occurred and the Series B Shares will
thereafter be convertible at the option of European Re into common shares upon
60 trading days advance notice to Trenwick. Trenwick believes that it is
unlikely that it will be able to raise additional capital or take other actions
that would result in its GAAP net worth exceeding $225 million prior to the
specified date.
The conversion of the Series B Shares could result in significant dilution
to the existing shareholders depending on the date of conversion, the amount
converted and the GAAP net worth of Trenwick at the time of conversion.
Risk Based Capital
Trenwick's domestic insurance subsidiaries are subject to the Risk-Based
Capital ("RBC") provisions as promulgated by the National Association of
Insurance Commissioners (the "NAIC"). Trenwick's significant reserve increases
in the fourth quarter of 2002 have had an adverse impact on the RBC ratings of
its principal domestic insurance company subsidiaries. RBC, which is generally
calculated and reported to the regulatory authorities with an insurance
company's annual regulatory filings on or before March 1 of each year, is
designed to measure the capital adequacy of the insurer based on the inherent
specific risks of the insurer. The RBC calculation yields a ratio of the total
adjusted statutory capital of an insurance company to the minimum level of
statutory required capital as calculated under the provisions of the RBC model.
The RBC calculation takes into account: (1) asset risk, (2) credit risk, (3)
underwriting risk, and (4) all other relevant risks including the insurance
company's current underwriting activities. The Model Act of the NAIC provides
four levels of regulatory activity if the RBC ratio yielded by the calculation
falls below specified minimums. At each of four successively lower RBC ratios
specified by statute, increasing regulatory action may be required. The four
levels are: (1) Company Action Level Event, (2) Regulatory Action Level Event,
(3) Authorized Control Level Event, and (4) Mandatory Control Level Event.
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Trenwick America Reinsurance Corporation's (domiciled in Connecticut)
reported RBC was at the "Regulatory Action Level Event" for the year ended
December 31, 2002. At this level, the regulated entity is required to submit a
Comprehensive Plan of Action to the regulatory body. Such a plan was submitted
to the Connecticut Insurance Department on January 23, 2003. In addition, the
Connecticut Insurance Department, at its discretion, is also able to take any
action deemed necessary under the circumstances. Prior to the Regulatory Action
Level Event, Trenwick America Reinsurance Corporation had entered into an
underwriting facility with Chubb Re, Inc. and ceased underwriting business on
its own. In connection with these developments, Trenwick America Reinsurance
Corporation also entered into a letter agreement with the Connecticut Insurance
Department in which Trenwick America Reinsurance Corporation agreed not to
conduct business, enter into certain transactions, including the payment of
dividends, or make any other material changes in the operations or management of
Trenwick America Reinsurance Corporation without the Connecticut Insurance
Department's approval. The description of the letter agreement herein is
qualified in its entirety by reference to the full text of the letter agreement,
a copy of which is attached hereto as Exhibit 99.9 and is incorporated herein by
reference.
The Insurance Corporation of New York (domiciled in New York) reported RBC
at the "Mandatory Control Level Event" for the year ended December 31, 2002. New
York Insurance Law requires that New York domiciled insurers report their
risk-based capital based on a formula calculated by applying factors to various
asset, premium and reserve items. The New York Insurance Department uses the
formula as an early warning regulatory tool for purposes of monitoring New York
domiciled insurance companies to identify possibly inadequately capitalized
insurers. The New York Superintendent of Insurance has explicit regulatory
authority to require various actions with respect to New York domiciled insurers
whose capital base or other operations are not satisfactory. The Insurance
Corporation of New York has ceased underwriting new business and is in ongoing
communication with the New York Insurance Department concerning its operations
and continued permitted activities. Recently, it has been informed by the New
York Insurance Department that it will be required to submit a plan to cure the
existing statutory capital impairment.
NYSE Listing and Share Transfers
Trenwick was notified by the New York Stock Exchange ("NYSE") in January
that its common shares could be subject to trading suspension and delisting
because the average closing price of its common shares was less than $1.00 over
a consecutive 30-trading-day period, in violation of the NYSE's criteria for
continued listing. Under NYSE guidelines, Trenwick must return to compliance
with the NYSE's criteria for continued listing within six months following
receipt of the NYSE's notification. In the event that Trenwick fails to return
to compliance during this time period, or the NYSE otherwise determines to
institute delisting proceedings, the common shares could be subject to trading
suspension and delisting.
The NYSE also notified Trenwick that it may review the continued listing
status of the Series A Perpetual Preferred Stock of LaSalle Re Holdings Ltd.,
Trenwick's
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Bermuda domiciled subsidiary ("LaSalle Re Holdings"). Although it noted that
LaSalle Re Holdings has not failed to meet any specific financial listing
criteria at this time, the NYSE indicated that it may make determinations as to
suitability for continued listing based on other factors, including the
performance of Trenwick and the ongoing scope of LaSalle Re Holdings'
operations.
In a letter dated March 17, 2003 the NYSE notified Trenwick that it had
failed to satisfy certain other listing criteria with respect to total market
capitalization and indicated that it may delist the securities of Trenwick and
LaSalle as early as March 18, 2003 depending on the status of the current
negotiations between Trenwick and its senior note holders. The Company has been
requested to update the NYSE as to the status of the senior debt negotiations by
March 18, 2003, and if a determination is made by the NYSE to continue listing,
to provide to the NYSE a satisfactory business plan that demonstrates compliance
with the NYSE's listing criteria within 18 months.
The Bermuda Monetary Authority (the "BMA") must give specific permission
for all issues and transfers of securities of Bermuda companies involving
persons who are not resident of Bermuda. When a company's securities are listed
on an appointed stock exchange as defined in the Bermuda Companies Act 1981, the
BMA may consent to the free transferability of all securities so listed.
Trenwick and LaSalle Re Holdings have been granted permission by the BMA to the
free transferability of all shares listed on the NYSE or any other appointed
stock exchange.
In the event of a delisting from the NYSE, Trenwick will seek to have its
common shares and the perpetual preferred shares of LaSalle Re Holdings traded
on the OTC bulletin board. However, the BMA's permission for free
transferability will no longer apply. Consequently, except as noted below, all
transfers of shares involving holders of Trenwick's or LaSalle Re Holdings'
securities must be approved by the BMA before they can be entered into
Trenwick's or LaSalle Re Holdings' share register. This procedure would only
apply to share transfers involving shareholders who hold shares in their own
name on Trenwick's or LaSalle Re Holdings' share register (a "record holder").
Shareholders who hold through nominees, brokers, or banks, which in turn have
accounts through other nominees, would not be affected by this approval
procedure unless one of the parties to the transfer becomes a record holder on
the Trenwick's or LaSalle Re Holdings' share register or the number of shares
held by an existing record holder is increased or decreased by the transfer.
The BMA has complete discretion to grant or withhold permission for
transfers and is not required to disclose the reason for a declination. The BMA
looks at each transfer request for indications of fraudulent or illegal activity
such as money laundering as well as other irregularities. In the event
Trenwick's or LaSalle Re Holdings' shares are delisted, their respective
transfer agents will be instructed to notify them immediately of any request for
transfers involving record holders and hold the transfer until notified of the
BMA's approval.
If required due to delisting, the pre-approval process will cause a delay
in a share transfer. Any transfer involving more than five percent of the
outstanding common
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shares or perpetual preferred shares requires additional information be provided
to the BMA, including a sworn Personal Declaration and a compliance
questionnaire.
Oak Agreement
Trenwick, LaSalle Re Limited and LaSalle Re Holdings entered into an
agreement (the "Oak Agreement") effective December 10, 2002 pursuant to which
the capital stock of Oak Dedicated Limited, Oak Dedicated Two Limited and Oak
Dedicated Three Limited (together, the "Oak Entities") were contributed to
LaSalle Re Limited and certain indebtedness owed to Trenwick by the Oak Entities
was forgiven. As a result of this transaction, LaSalle Re Limited, whose
authority to write new business was suspended by the BMA effective January 1,
2003, has indirectly been able to continue to write insurance for 2003 as a
participant in Lloyd's Syndicate 839. The description of the Oak Agreement
herein is qualified in its entirety by reference to the full text of the Oak
Agreement, a copy of which is attached hereto as Exhibit 99.10 and is
incorporated herein by reference.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Fifth Amendment to the Credit Agreement, dated as of January
16, 2003, by and among Trenwick America Corporation, Trenwick
Holdings Limited, Trenwick UK Holdings Limited, the lending
institutions from time to time party to the Credit Agreement,
Wachovia Bank, National Association, as Syndication Agent,
Fleet National Bank, as Documentation Agent, and JPMorgan
Chase Bank, as Administrative Agent.
99.2 Fifth Amendment and Consent to the Holdings Guaranty, dated as
of January 16, 2003, by and among Trenwick Group Ltd. and the
lending institutions from time to time party to the Credit
Agreement.
99.3 Agreement, dated January 28, 2003, by and between Trenwick
Group Ltd. and James F. Billett, Jr.
99.4 Sixth Amendment and Waiver to the Credit Agreement, dated as
of January 27, 2003, by and among Trenwick America
Corporation, Trenwick Holdings Limited, Trenwick UK Holdings
Limited, the lending institutions from time to time party to
the Credit Agreement, Wachovia Bank, National Association, as
Syndication Agent, Fleet National Bank, as Documentation
Agent, and JPMorgan Chase Bank, as Administrative Agent.
99.5 Sixth Amendment and Consent to the Holdings Guaranty, dated as
of January 27, 2003, by and among Trenwick Group Ltd. and the
lending institutions from time to time party to the Credit
Agreement.
99.6 Seventh Amendment and Waiver to the Credit Agreement, dated as
of March 7, 2003, by and among Trenwick America Corporation,
Trenwick Holdings Limited, Trenwick UK Holdings Limited, the
lending institutions from time to time party to the Credit
Agreement, Wachovia Bank, National Association, as Syndication
Agent, Fleet National Bank, as Documentation Agent, and
JPMorgan Chase Bank, as Administrative Agent.
99.7 Seventh Amendment to the Holdings Guaranty, dated as of March
7, 2003, by and among Trenwick Group Ltd. and the
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lending institutions from time to time party to the Credit
Agreement.
99.8 Fourth Waiver to the Credit Agreement, dated as of March 14,
2003, by and among Trenwick America Corporation, Trenwick
Holdings Limited, Trenwick UK Holdings Limited, the lending
institutions from time to time party to the Credit Agreement,
Wachovia Bank, National Association, as Syndication Agent,
Fleet National Bank, as Documentation Agent, and JPMorgan
Chase Bank, as Administrative Agent.
99.9 Agreement, dated December 3, 2002, by and between Trenwick
America Reinsurance Corporation and the Insurance Department
of the State of Connecticut.
99.10 Agreement, dated as of December 10, 2002, by and among
Trenwick Group Ltd., LaSalle Re Limited, and LaSalle Re
Holdings Limited.
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SIGNATURES
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 thereunto duly authorized.
TRENWICK GROUP LTD.
By: /s/ Alan L. Hunte
-------------------------------
Title: Executive Vice President
& Chief Financial Officer
Dated: March 17, 2003
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Fifth Amendment to the Credit Agreement, dated as of January
16, 2003, by and among Trenwick America Corporation, Trenwick
Holdings Limited, Trenwick UK Holdings Limited, the lending
institutions from time to time party to the Credit Agreement,
Wachovia Bank, National Association, as Syndication Agent,
Fleet National Bank, as Documentation Agent, and JPMorgan
Chase Bank, as Administrative Agent.
99.2 Fifth Amendment and Consent to the Holdings Guaranty, dated as
of January 16, 2003, by and among Trenwick Group Ltd. and the
lending institutions from time to time party to the Credit
Agreement.
99.3 Agreement, dated January 28, 2003, by and between Trenwick
Group Ltd. and James F. Billett, Jr.
99.4 Sixth Amendment and Waiver to the Credit Agreement, dated as
of January 27, 2003, by and among Trenwick America
Corporation, Trenwick Holdings Limited, Trenwick UK Holdings
Limited, the lending institutions from time to time party to
the Credit Agreement, Wachovia Bank, National Association, as
Syndication Agent, Fleet National Bank, as Documentation
Agent, and JPMorgan Chase Bank, as Administrative Agent.
99.5 Sixth Amendment and Consent to the Holdings Guaranty, dated as
of January 27, 2003, by and among Trenwick Group Ltd. and the
lending institutions from time to time party to the Credit
Agreement.
99.6 Seventh Amendment and Waiver to the Credit Agreement, dated as
of March 7, 2003, by and among Trenwick America Corporation,
Trenwick Holdings Limited, Trenwick UK Holdings Limited, the
lending institutions from time to time party to the Credit
Agreement, Wachovia Bank, National Association, as Syndication
Agent, Fleet National Bank, as Documentation Agent, and
JPMorgan Chase Bank, as Administrative Agent.
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99.7 Seventh Amendment to the Holdings Guaranty, dated as of March
7, 2003, by and among Trenwick Group Ltd. and the lending
institutions from time to time party to the Credit Agreement.
99.8 Fourth Waiver to the Credit Agreement, dated as of March 14,
2003, by and among Trenwick America Corporation, Trenwick
Holdings Limited, Trenwick UK Holdings Limited, the lending
institutions from time to time party to the Credit Agreement,
Wachovia Bank, National Association, as Syndication Agent,
Fleet National Bank, as Documentation Agent, and JPMorgan
Chase Bank, as Administrative Agent.
99.9 Agreement, dated December 3, 2002, by and between Trenwick
America Reinsurance Corporation and the Insurance Department
of the State of Connecticut.
99.10 Agreement, dated as of December 10, 2002, by and among
Trenwick Group Ltd., LaSalle Re Limited, and LaSalle Re
Holdings Limited.
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