If investors fail to approve a financing deal Scottish Re Group Ltd. has arranged, the company says it might have to seek protection under bankruptcy and insolvency laws if alternate financing was not available.
Executives of Scottish Re, Hamilton, Bermuda, have presented this warning and others in documents filed with the U.S. Securities and Exchange Commission. It also warned that regulatory action could be a consequence of the deal failing.
The documents include a preliminary proxy statement concerning the financing deal and a notice that the company plans to hold a shareholders’ meeting to give shareholders a chance to vote on the deal.
Scottish Re says it hopes to give the meeting date in a final proxy statement that will be mailed to shareholders by Jan. 19.
Scottish Re is a struggling life reinsurer that at one point was the second most active player in the U.S. life reinsurance market.
The financing deal, announced Nov. 27, 2006, involves plans for an affiliate of Massachusetts Mutual Life Insurance Company, Springfield, Mass., and a group of affiliates of Cerberus Capital Management L.P., New York, to each invest $300 million in Scottish Re.
The MassMutual affiliate and the Cerberus affiliate group would each get 1 million convertible shares. The convertible shares could be converted into 150 ordinary shares, or enough shares to give the investors ownership of about 69% of Scottish Re’s shareholder voting power, Scottish Re says in the preliminary proxy.
Once the deal was consummated, all company directors other than Paul Goldean, Scottish Re president, and Jeffrey Hughes, who represents a major shareholder, would resign.