Syncora Holdings Ltd. And Subsidiaries Enter Into A Transaction Support Agreement With Surplus Noteholders And SHL Preferred Shareholders

HAMILTON, Bermuda, July 1, 2016 /PRNewswire/ -- Syncora Holdings Ltd. ("SHL" and, together with its subsidiaries, the "Company") and its wholly-owned subsidiaries, Syncora Holdings US Inc. ("SHI") and  Syncora Guarantee Inc. ("SGI"), today announced that they have entered into a Transaction Support Agreement (the "TSA") with holders of more than 82% by principal amount of SGI's externally held surplus notes and holders of more than 84% by liquidation preference of externally held SHL preferred shares to support and participate in a comprehensive exchange transaction designed to delever and improve the overall financial condition of the Company, create and maximize value for SHL's common shareholders and all of the Company's other stakeholders and position SHL to raise capital in order to pursue future business opportunities.

The transaction, which is expected to close in the third quarter, would involve a series of interrelated transactions more fully described below that would result in: (i) reducing the Company's outstanding securities by $280 million, consisting of all $250 million of SHL preferred shares and an aggregate net reduction of $30 million (i.e. the $70 million tendered by SGI's surplus noteholders less the $40 million received by SHL's preferred holders of the principal, paid-in-kind interest, and accrued and unapproved interest (these components are referred to collectively as the "Total Claim Amount")) on SGI's surplus notes in exchange for approximately 30.3 million (or 35% of SHL common shares on a fully diluted basis) of newly issued SHL common shares; (ii) the reallocation by SGI to SHI of between $1.7 and $1.8 billion of net operating losses for use by SHI without reimbursement to SGI; and (iii) subject to the approval of the New York Department of Financial Services ("NYDFS"), on closing, an aggregate payment on SGI's surplus notes held by third parties of $55 million, allocated as described below.

Terms of TSA

The terms of the TSA call for:

• SGI's third party surplus noteholders to exchange $70 million of the Total Claim Amount owed on their surplus notes, for 20% of SHL's common shares (on a pro forma fully-diluted basis, after giving effect to the transactions).
• The conversion of all $165 million liquidation preference of SHL's preferred shares held by third parties into (i) 15% of SHL's common shares (on a pro forma fully-diluted basis, after giving effect to the transactions) and (ii) $40 million of the Total Claim Amount owed under the SGI surplus notes received in the exchange with SGI's surplus noteholders.
• The Company to cancel approximately $85 million liquidation preference of its owned SHL preferred shares and $30 million of the Total Claim Amount of SGI's surplus notes received in the exchange with SGI's surplus noteholders.
• The Company to amend its existing tax sharing agreement, allowing for the reallocation of between $1.7 and $1.8 billion of SGI's excess net operating losses (NOLs) to SHI for use by SHI without reimbursement, with SGI and its subsidiary, Syncora Capital Assurance Inc. ("SCAI"), receiving certain NOL protection measures.
• Subject to approval by the NYDFS, (i) SGI to make a payment of $55 million on amounts due to third party surplus noteholders for the full 2016 calendar year, to be paid in cash and allocated pro rata among SGI's short- and long-term surplus noteholders based on the amount of principal, including paid-in-kind interest, and accrued and unapproved interest on such principal and paid-in-kind interest (the "Cash Payment"), and (ii) the negative earned surplus of SGI and SCAI will be removed or decreased.
• In addition to the Cash Payment, SGI shall, from time to time, request NYDFS approval to pay all amounts due on the SGI surplus notes at the time of any such request and use its commercially reasonable efforts to seek NYDFS approval to make a net debt service payment to third parties of no less than $55 million per year, commencing in June 2017 or earlier
• SGI's third-party surplus noteholders and SHL's third-party preferred shareholders that sign the TSA will have the right to designate a total of three directors to the SHL board, subject to applicable regulatory approvals and the board's customary review process.

The transaction is subject to a number of conditions precedent, including requisite approvals by the NYDFS; 98% participation of third party surplus noteholders; approval by a majority of SHL preferred shares voted at a special meeting that will permit SHL to vary the rights of 100% of the SHL preferred shares; and a net payment by SGI to third party surplus noteholders of the amount described above.  The Company can provide no assurances that these approvals or consents will be obtained or that other conditions precedent will be satisfied or waived in a timely manner or at all.

Materials, including the execution copy of the Transaction Support Agreement, related to the discussions with SGI's surplus noteholders and SHL preferred shareholders that were previously only disclosed to those third parties pursuant to non-disclosure agreements are now available on www.syncora.com.

Notice to SHL common shareholders that also own or propose to acquire surplus notes or SHL Series A Preference Shares prior to the close of the transactions described in this release

SHL common shareholders with substantial holdings are cautioned that based on their holdings, after giving effect to the transactions described in this press release, they could become a 5% shareholder, which, under SHL's bye-laws would restrict their ability to buy and sell SHL common shares.  Please see IMPORTANT NOTICE FOR SHAREHOLDERS OF SYNCORA HOLDINGS LTD. REGARDING OWNERSHIP OF 5% OR MORE on the Company's home page at www.syncora.com for additional information on the Company's bye-law restrictions on share ownership above 5%.

Third Quarter Investor Call

Following completion of the transaction, the Company will host an investor conference call and provide details on the outcome of the transaction and discuss its future plans.

About Syncora Holdings Ltd.

Syncora Holdings Ltd. (OTC: SYCRF) is a Bermuda-domiciled holding company.  Syncora Holdings U.S. Inc. and Syncora Guarantee Inc. are wholly-owned subsidiaries of Syncora Holdings Ltd.  For additional information, please visit www.syncora.com.

Contacts
Michael Corbally
Syncora Holdings Ltd.
(212) 478-3400
[email protected]

Kimberly Kriger
Kekst
(212) 521-4800
[email protected]

Important Information and Forward Looking Statements

This press release is not an offer to exchange or a solicitation or acceptance of an offer to exchange, which may be made only pursuant to the terms and conditions of an offering memorandum.  In addition, this press release is not a proxy statement or a solicitation of proxies from the holders of SHL's preferred shares.

This press release contains statements about future results, plans and events that may constitute "forward-looking" statements, including the consummation of the restructuring transactions, receipt of regulatory approvals, receipt of sufficient participation by surplus noteholders and SHL preferred holders, satisfaction or waiver of conditions precedent and future strategic actions or plans.  We caution you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek," "comfortable with," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology.  Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control. These risks and uncertainties include, but are not limited to, the factors described in the Company's historical filings with the NYDFS, and in the Company's, Syncora Guarantee Inc.'s and Syncora Capital Assurance Inc.'s GAAP and statutory financial statements, as applicable, posted on its website at www.syncora.com.  Readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made.

SOURCE Syncora Holdings Ltd.

Related Links

http://www.syncora.com