R&Q outlook lowered to negative after tumultuous collapse of £482m deal

Ratings agency  AM Best has revised its outlook on  Randall & Quilter (R&Q) and its various subsidiaries to negative despite the company’s attempts to improve its financial stability through a planned  $100m+ capital raise and “strong interest” of existing shareholders after its initial plans to be acquired by 777 Partners-owned Brickell were scuppered.

Brickell PC Insurance Holdings backed out from its proposed £482 million deal to acquire  R&Q last week,  alleging “material breach” of their implementation agreement – a claim that the legacy and programme manager has firmly denied.

The acquisition agreement included the issue of $100 million of convertible preference shares to Brickell, which  AM Best believes “would have mitigated the impact of an expected IFRS loss for 2021 of between $135 million and $145 million on  R&Q's  capital base.”

R&Q announced late Wednesday (May 25) that following the outcome of its final shareholders vote, it has decided to pursue a $100 million capital raise to make up the shortfall. It expects to raise approximately $100 million via a placing and up to $8 million via an open offer, with plans to use $60 million of the total raised to fund collateral requirements and the balance to pay down debt.

AM Best said the revision of the implications of the under review status to negative from developing “reflects the risk that the equity raise will not complete and that  R&Q's risk-adjusted capitalisation will not return to historical levels.”

It noted that ratings will remain under review until AM Best has certainty around  R&Q's capital position.

The negative outlook impacts the long-term ICR of “bbb-” of  Randall & Quilter Investment Holdings, (Bermuda), the non-operating holding company of the group, as well as the financial strength rating of A- and the long-term issuer credit ratings (Long-Term ICR) of “a-” of Accredited Surety and Casualty Company, Inc. (ASC) (Orlando, FL), Accredited Specialty Insurance Company (ASI) (Phoenix, AZ) and Accredited Insurance (Europe) Limited (AIEL) (Malta).

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