Three months after announcing that it plans to set up U.S. reinsurance operations, Third Point Re USA’s first (and only) order of business to date is a $115 billion debt sale, according to U.S. Securities and Exchange Commission documents.
But the hedge fund-backed reinsurer also detailed some of the financing that it will use to move forward in U.S.
Third Point Re USA sold $115 billion of senior, unsecured notes into the market this week with Deutsche Bank and Credit Suisse as bookrunners. The 20 year bonds include a 7% coupon rate.
The proceeds will be used for general corporate purposes, according to SEC filings.
Thus far the only business Third Point Re USA has completed is the bond sale and “access financing,” but the prospectus details how hedge fund powerhouse Daniel Loeb plans to structure the new U.S operations.
Following the bond offer, Third Point Re USA will enter a 75% quota share reinsurance pact with Bermuda-based Third Point Re that includes a $250 million “maintenance agreement” in order for the U.S. operations can “maintain a minimum level of capital,” according to the filings.
In addition (and as expected), the reinsurance operations have inked an investment management agreement with Loeb’s Third Point LLC and Third Point Advisors.
However, the ties to Third Point hedge fund — as well as the financing relationship with the closely-held Bermuda reinsurance operations — were cited as risk in terms of gaining U.S. tax authorities attention.
“[We] believe that our current activities, notwithstanding our activities through TPRUSA and Third Point Re USA, will not cause TPRE [the Bermuda-based reinsurer] to be treated as engaging in a U.S. trade or business and will not cause us otherwise to be subject to current U.S. federal income taxation on our net income.” the filing states.
Last year the reinsurer announced that it was setting up shop in the U.S. by incorporating in Delaware. Third Point hired Thomas Wafer and Jonathan Norton — respectively the former chairman and chief actuary of Alterra Capital — to lead the charge. The group will be based in Short Hills, New Jersey.
“Third Point Re USA’s U.S. presence is a strategic component of our overall growth strategy,” the prospectus say. “As a result of Third Point Re USA’s U.S. presence, we expect to strengthen our relationships with U.S. cedents and brokers. We also expect to develop a firsthand understanding of cedent underwriting and claims capabilities that will benefit our own underwriting practices.”
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