Reliance Group Holdings has agreed to work with insurance regulators as it sells off parts of its business in an effort to pay off more than $700 million in debt.
The company’s main operating unit, Pennsylvania-based Reliance Insurance Co., agreed with Pennsylvania’s Insurance Department to file reports detailing its plans, including any sales and the payment of dividends from the operating company to the holding company, which holds the debt.
Reliance has been in discussions with the department for months according to PID spokesperson Angela Yarbrough. Tuesday’s move simply puts the ongoing talks between the insurer and regulators on an official footing. The department is now assessing whether Reliance’s reserves are sufficient to pay outstanding claims to policyholders.
Last week Reliance Group Holdings was exploring alternatives to restructure its debt, including protection under the federal bankruptcy code. There were also rumblings that Warren Buffett was looking at purchasing a segment of the company. Reliance Group Holdings must repay $237.5 million in bank debt by the end of August, but is currently in talks with its bankers to extend the deadline.
The company must also repay $291.7 million of bond debt in November and another $172 million of bond debt in 2003.
“Maybe they could have weathered the storm without this upcoming debt,” said James B. Auden, a senior director with Fitch IBCA. “But now, that’s definitely not going to happen.” Over the last several months, Reliance has sold off most of its business in separate deals to Hartford Financial Services Group Travelers Property Casualty and Bermuda-based reinsurer Overseas Partners Ltd.
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