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Reinsurer Lines Up Financing

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Scottish Re Group Ltd. says it now has freed the cash needed to make good on obligations to investors that could come due Wednesday.

Scottish Re, Hamilton, Bermuda, reported big losses earlier this year because of problems with some reinsurance arrangements, and it has faced concerns about its ability to respond to holders of senior convertible notes that might exercise optional put rights Wednesday.

Although Scottish Re operating units have had adequate supplies of cash, the parent company has faced constraints on its ability to use the cash.

A group of financial institutions led by a unit of Bank of America Corp., Charlotte, N.C., now has agreed to amend a July 14, 2005, credit agreement, Scottish Re says.

The change will let Scottish Re’s Scottish Annuity & Life Insurance Company (Cayman) Ltd. unit make up to $115 million in distributions this week to help Scottish Re make any payments due in connection with the exercise of the convertible note holders’ put rights, Scottish Re says in a report filed with the U.S. Securities and Exchange Commission.

Scottish Re and other borrowers have agreed to put in place irrevocable back-up letters of credit equal to at least 105% of the total aggregate amount of letters of credit outstanding under the original credit agreement, Scottish Re says.

Scottish Re had $1.4 million in outstanding letters of credit under the original credit agreement Nov. 30, the company says.

Meanwhile, a unit of Comerica Inc., Detroit, has agreed to issue a secured back-up letter of credit for up to $4.9 million for Scottish Re and a letter of credit for up to $100,000 for the Cayman operating company to satisfy obligations related to the amendment of the July 2005 credit agreement, Scottish Re says.

Comerica now has issued back-up letters of credit in the amounts of $78,750 for the operating company and $1.4 million for Scottish Re, Scottish Re says.

Scottish Re and the operating company each will pay 0.5% per year on the back-up letters of credit, which are set to expire in 1 year, Scottish Re says.

The operating company will pay an unused fee on the average daily balance of the unused portion of the back-up letters of credit, Scottish Re says.


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