Standard & Poor’s commented on Feb. 1 regarding the Jan. 24 announcement that Reliance Group Holdings Inc. and related subsidiaries completed a settlement with various reinsurers and insurers concerning its potential loss exposure in the Unicover Managers pool.
S&P believes the resolution of this matter is an important step in management’s plans to address its current financial situation.
Reliance and Reliance Financial Services Corp., an intermediate holding company, currently have more than $500 million of debt obligations maturing in March and again in November 2000.
S&P said the enterprise also needs to improve capital adequacy at the operating company level, which was hurt by the $227-million reserve charge in the second quarter of 1999 and the $100-million charges relating to the settlement.
Management is reportedly in the process of negotiating and expects an extension of its March 31, 2000, deadline with bankers regarding its bank credit facility. Management is also exploring several methods to raise capital, including sale of potential assets.
S&P will continue to monitor the situation. Until further review, Reliance ratings remain on CreditWatch where they were placed on Oct. 6, 1999, with negative implications.
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