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Standard & Poor's Lowers Ratings on Reliance Group Holdings Inc.

Strategic Insights

— 1 min read

Standard & Poor's today lowered its ratings on Reliance Group Holdings Inc. and its members, placing them on CreditWatch with developing implications. The action comes as the company faces increasing concerns over its ability to refinance approximately $500 million in debt obligations, which are maturing in August and November of this year. Reliance's divestment of key businesses and retention of run-off reserves on sold businesses expose it to significant adverse loss reserve development. The company's pending acquisition by Leucadia National Corp. adds to the uncertainty, threatening Reliance's ability to maintain business relationships.

Key Takeaways:

  • Standard & Poor's lowered the ratings of Reliance Group Holdings Inc. and its members due to concerns over refinance debt obligations worth $500 million.
  • The company is divesting key businesses, which weakens its ability to generate liquidity to meet ongoing obligations.
  • Reliance retains the run-off of reserves on sold businesses, exposing it to potentially significant adverse loss reserve development.
  • The pending acquisition by Leucadia National Corp. threatens Reliance's ability to maintain business relationships.
  • The company faces a liquidity strain due to negative operating cash flow and potential loss reserve development.
  • Standard & Poor's will continue to monitor Reliance's discussions with Leucadia National Corp.
  • Reliance National Indemnity Co., Reliance National Insurance Co., and Reliance Universal Insurance Co. all have their financial strength ratings lowered to B from BBB-.

Statistics:

  • $500 million: approximate amount of debt obligations maturing in August and November of this year.
  • 100%: percentage of outstanding shares of Reliance to be acquired by Leucadia National Corp.
  • 5 months: time frame for completing due diligence extended by Leucadia National Corp.

Sources:

  • PRNewswire, July 14 (2000 again, it was stated no date would be added except for dates provided and "PRNewswire" mentioned as the source)
  • CreditWire, with no date provided
  • Reliance Group Holdings Inc. and other related companies, with no specific publication date.

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