Heritage Insurance Holdings, Inc. Announces New Credit Facilities, Redemption of Senior Notes and Repurchase of Convertible Notes
As previously disclosed, in
In total, the Company will borrow
Key points, reflecting consummation of all transactions described above:
- 79% of the convertible notes issued in 2017 will have been repurchased, leaving only
$29.2 million in principal amount outstanding held by third parties. - 3,595,452 shares will be issued to existing convertible note holders.
- Excluding amortization, annual interest expense is estimated at
$8.4 million (5.4%* blended interest rate) vs.$15.6 million (7.9%* blended interest rate) as ofSeptember 30, 2018 , reflecting$7.2 million of annual pre-tax savings (approximately$5.3 million after-tax). - Relative to third quarter 2018, the Company expects its issuance of 3,595,452 shares to increase tangible book value per share by approximately 4% and to reduce book value per share by approximately 6% (book value per share was
$15.16 at third quarter 2018). This only reflects the impact of the share issuance, not the entire transaction described herein. - Despite the issuance of 3,595,452 shares, the Company only expects a minor negative impact to EPS given the favorable offsetting impact of anticipated debt service savings.
- The Company expects its debt-to-capital ratio to decline meaningfully, reducing overall risk profile.
- One-time
$2.4 million premium expense expected in fourth quarter 2018 on early redemption of$79.5 million senior secured notes.
*Interest rates on new and retired debt include variable and fixed components and are calculated based on the prevailing contractual rates at the time of this press release.
About Heritage
Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "or "continue" or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. This release includes forward-looking statements relating to (i) the effects of the new credit facilities on our capital structure, including expected lower annualized interest expense, (ii) our anticipated use of proceeds from the new credit facilities, (iii) the timing of the redemption of the senior secured notes, (iv) the expected timing and amount of the closing of the convertible senior note exchanges, (v) expected effects to tangible book value per share, book value per share, EPS, debt service costs and debt-to-capital ratio, (vi) expected positive financial effects in the fourth quarter of 2018 and (vii) expected reduction to number of shares held short. The risks and uncertainties that could cause our actual results to differ from those expressed or implied herein include, without limitation: our ability to comply with our obligations under the new credit facilities, including the financial and other covenants contained therein, the success of the Company's marketing initiatives; inflation and other changes in economic conditions (including changes in interest rates and financial markets); the impact of new federal and state regulations that affect the property and casualty insurance market; the costs of reinsurance and the collectability of reinsurance; assessments charged by various governmental agencies; pricing competition and other initiatives by competitors; our ability to obtain regulatory approval for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against us, including the terms of any settlements; risks related to the nature of our business; dependence on investment income and the composition of our investment portfolio; the adequacy of our liability for losses and loss adjustment expense; our ability to build and maintain relationships with insurance agents; claims experience; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in loss trends; acts of war and terrorist activities; court decisions and trends in litigation; and other matters described from time to time by us in our filings with the
Investor Contact:
Executive Vice President & Director of Investor Relations
727.871.0206
Email: [email protected]
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