May 21, 2012
Old Republic International Corporation
(NYSE: ORI) today announced that its wholly owned subsidiary, Republic Financial Indemnity Group, Inc. (RFIG) has sold a 20.6% common equity interest to a group of investors in a partial leveraged buyout (LBO). The transaction has taken place in conjunction with Old Republic's decision to spin-off substantially all of its RFIG common stock holdings as a taxable dividend in-kind to ORI's shareholders. The spin-off will establish RFIG as a separate publicly held company. A
Registration and Information Statement
describing RFIG's business and its common shares will be filed with the Securities and Exchange Commission (SEC) in the next few days. As soon as the
clears SEC review, it will be sent to ORI shareholders of record, at which point the freely tradable RFIG common stock will be distributed.
The Partial LBO and Follow-on Spin-off
In making the announcement,
A. C. Zucaro
, ORI's chairman and chief executive officer, noted, "These events are a natural outcome of our previously announced objective of combining the mortgage guaranty (MI) and consumer credit indemnity (CCI) lines, and separating them from the rest of our business. We still have a long-term strategic interest in the future of these insurance products. This interest, however, has been affected by the cumulative operating losses and the consequent full depletion of the capital base that sustained these lines. In the face of this situation, we concluded the best option for recapitalizing the business was through the partial leveraged buyout just consummated, followed by the spin-off to Old Republic's existing shareholders of substantially all of our stock ownership in RFIG."
The partial LBO transaction was led by
Christopher S. Nard
, who has been serving as ORI's president and as a senior executive of several subsidiaries, including those engaged in RFIG's MI and CCI businesses. The investor group also includes a number of key associates responsible for managing these two businesses, and three unaffiliated individual investors very well versed in insurance matters.
"Restructuring RFIG as a separately traded public company represents a unique opportunity," said Nard. "It provides an opportunity to re-establish a viable capital base, as well as recast our MI and CCI businesses as reliably sound guarantors of long-term financial commitments. We believe that a private sector involvement in securing these commitments is essential to the financing of home mortgages. Our aim is to be a competitive player in a necessary industry-wide recapitalization of this private sector, and to work towards a more robust management of the catastrophic risk exposures attached to these financial indemnity products."