Highbridge, KKR and Sankaty will own 80.6% of company
Towergate’s creditors have struck a deal that will hand control of the troubled broker to its unsecured debt-holders.
Under the widely expected deal, the unsecured creditors, led JP Morgan-owned investment firm Highbridge Capital Management, will now acquire 80.6% of Towergate’s equity from the secured creditors after investing a total of £300m.
The secured creditors will retain 19.4% of the company.
The new agreement has been unanimously approved by the Towergate board. More than 75% of the secured creditors and 65% of the unsecured creditors have approved the deal.
On Monday, Towergate reached an agreement with its secured creditors under which the secured creditors would acquire 100% of Towergate, cut its net debt to £370m and provide £75m of additional funding to the broker.
Under the new deal, the unsecured creditors – Highbridge, KKR and Sankaty Advisors –will pay £250m in cash, known as the SUN Capital Contribution, for their 80.6% stake.
They will also inject an additional £50m of equity into Towergate. Added to the £75m already being provided by the secured creditors, this will give Towergate new additional funds of £125m.
The new deal will slightly increase Towergate’s net debt to £380m from the £370m envisaged under the previous deal.
Difficult few months
Towergate executive chairman Alastair Lyons:“I am very happy that a consensual agreement has been reached between our senior creditors. This further agreement brings the very difficult last few months to an excellent conclusion.
He added: “The company now has a highly committed shareholder base that has demonstrated its strong belief in the potential of our business by the extent of their investment. The company has a strong balance sheet, having substantially reduced its debt burden, and has almost halved its interest bill. Taken together with the new funds being invested, this gives the company a strong positive cash flow to support the completion of the change programme and the further growth of the business.”
The majority shareholders added: “We are excited about working with the Towergate team. This joint agreement provides the best guarantees for Towergate’s employees, insurer partners and customers. This agreement brings long-term financial strength and stability, and outlines a compelling strategy to strengthen Towergate as a leading UK insurance broker.”