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Fitch puts Montpelier on watch
Fitch Ratings said it placed Montpelier Re Holdings Ltd.’s ratings on negative watch, including its A- issuer default rating and the A insurer financial strength rating for Montpelier Reinsurance Ltd., the company’s principal reinsurance operating subsidiary.
The rating action follows news that Endurance Specialty Holdings Ltd. entered into a definitive merger agreement to acquire Montpelier Re Holdings for total consideration of $1.8 billion, Fitch said.
The close is expected in the third quarter of 2015, the agency said, and is subject to regulatory approvals and approval by both companies’ shareholders.
The negative watch primarily reflects the existing negative outlook for Montpelier’s ratings, reflecting pressures on its competitive market position due to the impact of adverse reinsurance market conditions, Fitch said.
The agency said it believes an acquisition by Endurance Specialty would likely help relieve many of those pressures.
In the interim, Montpelier is potentially more vulnerable should the merger fail to be completed as the company would likely either seek to find a replacement buyer or look to continue to operate in the challenging reinsurance market environment as an independent entity after signaling to the market a need to merge, Fitch said.
The ratings on negative watch include Montpelier Re’s issuer default rating of A-, BBB+ rating on its $300 million 4.7% senior notes due Oct. 15, 2022 and BBB- rating on its $150 million 8 7/8% non-cumulative perpetual preferred securities.
The BBB- rating on Montpelier Capital Trust III’s $100 million floating rate trust preferred securities due March 30, 2036 also was placed on negative watch.
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