EX-99.3 5 d52959_ex99-3.txt PRESS RELEASE OF TRENWICK GROUP LTD. Exhibit 99.3 Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- A. Existing LOC -------------------------------------------------------------------------------- Account Party: Trenwick Holdings Limited (the "Account Party"). -------------------------------------------------------------------------------- Banks: All of the Banks (the "Existing Banks") with commitments under existing LOC (the "Existing LOC") pursuant to the existing credit agreement (the "Existing Credit Agreement"). -------------------------------------------------------------------------------- Amount: $182.5 million, with each of the Existing Banks' commitment permanently reduced pro rata to reflect the reduction of the Existing LOC from approximately $226 million to $182.5 million; provided that at least 91.25% (the "Renewal Percentage") of the Existing Banks (as determined by reference to each Existing Bank's commitment before giving effect to the above-referenced reduction) elect to participate in the Renewal LOC (as defined below). -------------------------------------------------------------------------------- Beneficiary: Lloyd's (in support of the underwriting of syndicates 839 and 44). -------------------------------------------------------------------------------- Expiration: December 31, 2005. -------------------------------------------------------------------------------- B. Renewal LOC -------------------------------------------------------------------------------- Account Party: The Account Party. -------------------------------------------------------------------------------- Banks: The renewal LOC (the "Renewal LOC" and, together with the Existing LOC Facility, the "LOC Facility") will include all of the Existing Banks who elect to participate in the Renewal LOC ("the Renewing Banks," with any of the Existing Banks who do not participate in the Renewal LOC being referred to herein the "Nonrenewing Banks") with each of the Renewing Banks increasing its respective commitment pro rata to reflect the termination of the commitments of the Nonrenewing Banks; provided that the Existing Banks constituting the Renewal Percentage elect to participate in the Renewal LOC. -------------------------------------------------------------------------------- Amount: $182.5 million, subject to reduction on a dollar for dollar basis upon drawings being made on the Existing LOC. -------------------------------------------------------------------------------- Beneficiary: Lloyd's (in support of Syndicates 839 and 44). -------------------------------------------------------------------------------- Effective Date January 1, 2006 -------------------------------------------------------------------------------- Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- Expiration: December 31, 2006. -------------------------------------------------------------------------------- C. Terms applicable to the LOC Facility -------------------------------------------------------------------------------- Guarantors: Trenwick Group Ltd. ("Trenwick") and each existing and future direct and indirect subsidiary of Trenwick (other than the Account Party), to the extent permitted by law or applicable regulatory authorities. -------------------------------------------------------------------------------- Security: The Nonrenewing Banks will continue to have their respective obligations under the Existing LOC secured by a pledge of 100% of the stock and equity interests of La Salle Re Holdings Limited and La Salle Re Limited (the "Existing Collateral"). The Renewing Banks shall have their respective obligations under the Existing LOC and the Renewal LOC secured by the following, to the extent permitted by applicable law and instruments governing the currently outstanding indebtedness of Holdings and its subsidiaries: (i) the Existing Collateral (which shall be pari passu with the liens in favor of the Nonrenewing Banks), (ii) a pledge of 100% of the stock and equity interests now or hereafter owned by Holdings and its direct and indirect subsidiaries (other than the Existing Collateral), and (iii) substantially all of the present and future assets and property of Holdings, each direct and indirect U.S. nonregulated subsidiary of Holdings and each direct and indirect Non-U.S. subsidiary of Holdings (which security shall include, without limitation, the current and future profits from Trenwick America and the OAK dedicated entities). -------------------------------------------------------------------------------- Pricing: o Nonrenewing Banks: o Same as the Existing Credit Agreement. o Renewing Banks: o 500 bps per annum on each Renewing Bank's commitment under the Existing LOC during the period that the Existing LOC is in effect (i.e., from the date which is the date of the closing of this transaction through December 31, 2005) (the "Existing LOC Period") and on each Renewing Bank's commitment under the Renewal LOC during the period that the -------------------------------------------------------------------------------- -2- Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- Renewal LOC is in effect (i.e., from January 1, 2006 through December 31, 2006) (the "Renewal LOC Period"), payable quarterly. o An additional Letter of Credit Fee in the form of PIK notes (the "PIK Notes"), to be issued to each Renewing Bank equal to the PIK Note amount (as defined below). Interest on the PIK Notes shall accrue on a quarterly basis at an interest rate of LIBOR plus 250 bps per annum via the issuance of like-kind notes. The "PIK Note Amount" shall equal the difference, calculated on a quarterly basis, between (i) 500 bps per annum on each Renewing Bank's commitment under (I) the Existing LOC during the Existing LOC Period and (II) the Renewal LOC during the Renewal LOC Period, and (ii) the cost to Trenwick (expressed in basis points) to have the Berkshire Back-Up LOC (as defined below) issued. o An additional Letter of Credit Fee in an amount equal to 50 bps on each Renewing Bank's commitment under the Existing LOC during the Existing LOC Period and the Renewal LOC during the Renewal LOC Period to the extent Trenwick has not collateralized the LOC in a manner satisfactory to the Administrative Agent on dates to be determined. o Warrants to purchase common stock equal to 10% of Trenwick's fully diluted equity capital as of the closing of the transaction on terms and conditions satisfactory to the Banks. The warrants shall be issued to each Renewing Bank pro rata based on each Bank's commitment (as determined by reference to each Renewing Bank's commitment under the Renewal LOC). o An additional Letter of Credit Fee equal to 15% of the profits earned by Trenwick for the 2002 and 2003 years of Account. -------------------------------------------------------------------------------- Cash Collateralization The obligations of the Renewing Banks under the of the Existing LOC and Renewal LOC will be collateralized in a manner -------------------------------------------------------------------------------- -3- Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- LOC: satisfactory to the Administrative Agent with the proceeds from the following (less any cash letter of credit fees paid to the Existing Banks and the Renewing Banks): o any debt issuance. o any equity issuance. o any asset sale. o any profits earned from the Oak dedicated entities. -------------------------------------------------------------------------------- Affirmative Covenants: Similar to the Existing Credit Agreement with changes consistent within the context of this transaction, including, without limitation, the following: o Trenwick International Limited to be placed into run-off prior to December 31, 2002. o Trenwick to use its best efforts to terminate the Existing LOC and Renewal LOC by December 31, 2003. o Trenwick to fully collateralize in a manner satisfactory to the Administrative Agent the obligations of the Renewing Banks under the Existing LOC and Renewal LOC by December 31, 2003 to the extent the respective LOCs are not terminated. o Trenwick to use its best efforts to secure stop-loss treaties satisfactory to the Required Banks for the 2000, 2001 and 2002 years of account. o Trenwick to use its best efforts to convert the LaSalle regulated entities to Class 3 insurer status. o Senior Notes to be refinanced no later than March 1, 2003 in a manner satisfactory to the Required Banks. o Trenwick to pay Lloyd's any residual amounts due for the 2002 and prior years of account. o Trenwick to use its best efforts to secure loss portfolio transfers at LaSalle satisfactory to the Required Banks. o Monthly reporting. o Reviews by Elliston or similar company at the request of the Required Banks, including, without limitation, a review and analysis of the salaries and -------------------------------------------------------------------------------- -4- Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- directors' fees in connection with the Trenwick Managing Agency syndicate. o Monitoring by Elliston or similar company at the request of the Required Banks with respect to any run off costs incurred in connection with the Existing LOC and Renewal LOC, with the Required Banks retaining veto rights in connection with the incurrence of such run off costs. o The appointment of new directors satisfactory to the Required Banks to manage syndicates 839 and 44 to the extent such syndicates runoff for the 2003 and prior years of account. -------------------------------------------------------------------------------- Negative Covenants: Similar to the Existing Credit Agreement with changes consistent in the context of the transaction, including, but not limited to the following: o Prohibitions on any distributions of any kind from the Oak dedicated entities except to Lloyd's or to collateralize the Existing LOC and Renewal LOC. o Prohibitions on writing any future U.S. D&O and E&O business. o Prohibition on writing any new or renewal business that has an insurance period greater than 12 months plus odd time to a maximum of 18 months. o Prohibition on writing any business, including by class, duration or otherwise, without review by Elliston or similar company and with the Required Banks retaining veto rights in connection of the writing of such business. o Further prohibitions on debt, including, but not limited to, a prohibition on the guaranty of the Senior Notes. o Further prohibitions on the incurrence of liens. o Further prohibitions on asset sales and reorganizations, provided that (a) Holdings will be permitted to redomesticate to Delaware and, if applicable, merge Trenwick America Corporation and LaSalle Re Holdings Limited into the redomesticated Holdings, (b) Chartwell Insurance Company will be permitted to merge with and into -------------------------------------------------------------------------------- -5- Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- Trenwick America Reinsurance Corporation (c) LaSalle Re Limited will be permitted to acquire Oak Dedicated Limited and Oak Dedicated Three Limited, (d) Holdings will be permitted to sell Trenwick International Limited and/or Trenwick Holdings Limited and (e) Holdings will be permitted to dividend and sell Dakota Specialty Insurance Company. o Prohibition on expenditures (other than claims payments) in excess of $100,000 without the approval of the Required Banks. o Prohibition on other than ordinary and necessary expenditures made by the LaSalle entities. o Prohibitions on salary increases, bonuses, options and other similar forms of compensation except pursuant to plans already in existence and within the normal course of business. o Prohibitions on intercompany transfers and on dividends, including, without limitation, on Holdings common shares, Holdings Series B Cumulative Convertible Perpetual Preferred Shares and LaSalle Series A Preferred Shares, with limited exceptions for certain intercompany transfers and intercompany dividends to be agreed upon, and the prohibition of payments on the Trust Preferred Securities. o Prohibition on any new agreements permitting any other creditors to be preferred over the Banks. -------------------------------------------------------------------------------- Financial Covenants: o Maximum Leverage Ratio (as currently defined) of .325 to 1. o Minimum Combined Statutory Surplus (as currently defined) of not less than $325 million. o Minimum Tangible Consolidated Net Worth (as currently defined) of at least $350 million. -------------------------------------------------------------------------------- Conditions Precedent: Similar to the Existing Credit Agreement with changes consistent with the context of the transaction, including but not limited to the following: o Payment by Trenwick to Lloyd's of approximately $104 million to cure the solvency deficit. -------------------------------------------------------------------------------- -6- Trenwick Group Ltd. Term Sheet LOC Facility December 3, 2002 -------------------------------------------------------------------------------- o Lloyd's agreement that it will apply the $104 million payment to meet the solvency deficit before it draws on the LOC. o Delivery of a solvency certificate. o Regulatory approval in manner satisfactory to each of the Renewing Banks regarding the reserve requirements for each of the Renewing Banks and the treatment of the Existing LOC and Renewal LOC on each of the Renewing Bank's financial statements. o Agreement with Lloyd's on the form and substance of the Existing LOC and the Renewal LOC. o Each Renewing Bank's approval of the terms and conditions of the back-up LOC to be issued by Berkshire to support the 2003 year of account (the "Berkshire Back-Up LOC"), it being understood and agreed that the Berkshire Back-Up LOC shall be drawn upon by Lloyd's only after exhaustion of the Existing LOC or the Renewal LOC, as the case may be. o The LOC Facility closing by no later than December 31, 2002. -------------------------------------------------------------------------------- Event of Default: Similar to the Existing Credit Agreement with changes consistent with the context of the transaction, including but not limited to the following: o The Termination of the Chubb and Berkshire Agreements. -------------------------------------------------------------------------------- Amendments & Waivers: Similar to the Existing Credit Agreement with the additional requirement that any material transfers (intercompany or otherwise) from the LaSalle entities (other than transfers to collateralize or reimburse the Existing LOC or Renewal LOC or pay letter of credit or other fees to the Banks) require 66-2/3% Bank approval to the extent that this additional requirement does not require 100% Bank approval. -------------------------------------------------------------------------------- -7-