R&Q turns to $100m+ capital raise to pay off debt as Brickell deal breaks

Randall & Quilter (R&Q) has dropped plans to pursue its proposed sale to 777 Partners-owned Brickell after the buyer’s sudden move to  terminate their £482 million deal based on grounds that the legacy and programme manager has firmly denied. In order to de-lever its balance sheet and improve financial profile, R&Q is now turning its focus to a $100m+ capital raise, reaffirming “great confidence” in the company’s future prospects, driven by a “compelling new strategy and significant positive changes”.

The global specialty insurer announced late Wednesday (May 25) after its reconvened Special General Meeting (SGM) that it has failed to gain shareholders vote to proceed with its acquisition.

The move came shortly after Brickell delivered a letter declaring a termination of its  £482 million deal to acquire  R&Q with an additional commitment of  $100 million of new equity. Brickell alleged “material breach by  R&Q of the terms of the Implementation Agreement”, stating that it is therefore “exercising its right to terminate the Implementation Agreement with immediate effect.”

R&Q has denied the allegation. “ R&Q does not agree that it is in breach of the Implementation Agreement as suggested and therefore does not agree that Brickell has a right to terminate the Implementation Agreement,” it said in a statement early Wednesday, May 25.

But in a statement released late Wednesday following the outcome of the final shareholders vote,  R&Q said it will now pursue a $100 million capital raise to make up the shortfall. “As the Transaction will not proceed, the Company is now focussed on raising approximately $100 million via a Placing and up to $8 million via an Open Offer (the Fundraise),” the company said.

Additionally, it noted that, following a short market sounding process, certain existing shareholders have indicated “strong interest” to subscribe for in excess of $100 million in the fundraise.

The raise is expected to comprise a non-underwritten firm and conditional non preemptive placing of shares to institutional shareholders and an open offer to existing qualifying shareholders. The placing is expected to be launched on or around June 13.

The company is expecting to offer a maximum of 10% of its issued share capital on a firm basis with additional ordinary shares conditionally upon shareholder approval.

R&Q plans to use $60 million of the total raised to fund collateral requirements and the balance to pay down debt. The company is said to have received pre-emptive waivers from its bank lenders on its existing financial covenants until the earlier of completion of an equity raise or June 29.  R&Q is in discussions with its lending banks to extend the waivers.

“Following the outcome of today’s vote, we will turn our focus to the fundraise,” said William Spiegel (pictured), executive chairman of  R&Q. “Having prepared for this as an option when we originally engaged with shareholders, we are well placed to launch this shortly.

“Throughout this process our priority has always been delivering the best outcome for shareholders and the outcome of the vote has demonstrated the longterm value that investors see in the business.

“We continue to have great confidence in the future prospects for  R&Q, and expect in excess of $90 million in pre-tax operating profit in 2024. We look forward to engaging with our shareholders on the fundraise.”

Alastair Campbell, non-executive director and senior independent director of  R&Q, commented on behalf of the Board: “Following further engagement with our shareholders our priority now is to secure the funding needed to de-lever our balance sheet and improve our financial profile.

“Since becoming Executive Chairman just over twelve months ago, William, alongside his new management team, have outlined a compelling new strategy and driven significant positive change at  R&Q, enhancing its culture, risk management and governance. We look forward to engaging with our shareholders as we proceed with the fundraise.”

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