China’s Fosun Weighs Options for Hong Kong-Based Peak Re: Sources
Fosun International Ltd. is weighing strategic options for its Hong Kong-based Peak Reinsurance Co. as the Chinese conglomerate looks to pay down debt, according to people familiar with the matter.
Fosun is working with a financial adviser as it considers options including the potential sale of its majority stake or a minority interest in the reinsurer, the people said, asking not to be identified because the matter is private. A transaction could value Peak Re at $500 million to $1 billion, the people said.
The conglomerate has received preliminary interest from potential buyers including private equity firms, the people said. Considerations are at an early stage and the company may still decide against pursuing a transaction, the people said.
Fosun regularly evaluates options for its businesses, its representative said in response to a Bloomberg News query, without providing specific comments on Peak Re.
US-based Prudential Financial Inc. owns about a 13% stake in the reinsurer, while Fosun holds the remainder, according to Peak Re’s latest annual report.
Founded in 2012, Peak Re focuses on insurance including property and casualty, and life and health, according to its website. It counts more than 580 clients across 60 markets in Asia Pacific, Europe, the Middle East and Africa, and the Americas. It had about $2.1 billion in gross written premiums as of the end of last year.
Fosun, whose business spans from the Club Med resort chain to French fashion house Lanvin, told analysts earlier this week that it’s targeting to sell as much as $11 billion of assets within the next 12 months. It’s also reviewing its holdings in financial institutions in Europe as part of its efforts to raise cash and repay debt, people familiar with the matter have said. A representative for Fosun said the group currently has no plans to sell.
Moody’s Investors Service on Tuesday downgraded Fosun a step further into junk territory, citing weak liquidity at the holding-company level, which is “insufficient to cover” debt maturing over the next 12 months. Moody’s latest ratings were unsolicited, the credit assessor said. Fosun on Monday disclosed it notified the firm to terminate business cooperation and said it stopped providing Moody’s with relevant information.
Fosun’s dollar bonds have recovered from record low levels in recent weeks following reports of potential asset sales. Its notes bounced up further Thursday morning, with some on pace to see their biggest gains in two weeks. Fosun shares climbed as much as 3.6% on Thursday, touching their highest intraday level in three weeks.
The ratings agency placed Peak Re’s Baa1 insurance financial strength rating on review for downgrade on Oct. 7, after changing its outlook in August to negative. Peak Re faces increasing risks of contagion from Fosun’s weakening credit profile, Moody’s said in a statement. The reinsurer has implemented effective ring-fencing measures and its capital is adequately protected from access by shareholders or other third parties, according to a Peak Re statement addressing the review.
Peak Re’s sole public bond, a 5.35% perpetual note guaranteed by the firm, slumped from near par in June to around 65 cents on the dollar this week.
–With assistance from Alice Huang.
Photograph: A pedestrian walks across a footbridge in front of the Fosun International Ltd. headquarters building in Shanghai, China, on Friday, Dec. 11, 2015. Photo credit: Qilai Shen/Bloomberg