Cinven bought Eurovita bonds from GIC, others to help liquidation-source

UnipolSai Assicurazioni SpA

26/09/2023 17:10

By Valentina Za and Emilio Parodi
       MILAN, Sept 26 (Reuters) - Private equity firm Cinven
has agreed to buy back 160 million euros ($170 million) of debt
sold by its insurer Eurovita and is open to supporting other
measures to avoid a messy liquidation of the Italian company, a
person with knowledge of the situation told Reuters.
    Cinven this month signed an accord with GIC, Singapore's
sovereign fund, and another two investors to purchase from them
140 million euros of Tier2 Eurovita bonds, the source added.
    GIC and Eurovita had no immediate comment.
    Cinven, which acquired Eurovita in 2017, also launched a
tender offer to buy back another 20 million euros of bonds from
investors including Italian financial institutions, so that only
around 9 million remain outstanding, the source said.
    Italian insurance authorities placed Eurovita under special
administration this year, the first time they have taken such a
step, after rising rates blew a hole in the life insurer's cash
reserves.
    At one point, Eurovita's capital needs were at least four
times higher than what Cinven had put in to try and plug the
shortfall, another person with knowledge of the matter told
Reuters at the time. 
    To protect savers, a group of five insurers has agreed to
take over the life policies of Eurovita clients, while the rest
of the company will be liquidated, in a rescue orchestrated by
Italian authorities. The five insurers will become shareholders
in a new company dubbed Cronos Vita.
    Italian prosecutors have been probing false accounting
charges in relation to the blow-up. 
    Cinven's efforts to stave an insolvent liquidation, in which
a company is forced to sell its assets to repay creditors, would
improve its position in relation to the criminal inquiry,
another person close to the matter said. 
    The British investment firm had offered to pump 100 million
euros into the new Cronos Vita company, the two sources said,
matching a cash injection into Eurovita it conducted in February
following pressure from regulators.
    Instead, Cinven was asked to carry out the debt buyback and
cancel the bonds to support a solvent liquidation, one of the
people added. 
    Like other life insurers, especially those relying on banks
to sell products, Eurovita was hit by early redemptions once
rates started rising and savers sought better returns. 
    News of the firm's troubles and Cinven's reluctance to
promptly run to the rescue accelerated redemptions, eventually
forcing regulators to halt them.
    The freezing is in place until Oct. 31 when the new company
is expected to be established.
    Assicurazioni Generali  GASI.MI , PosteVita  PST.MI , Intesa
Sanpaolo Vita  ISP.MI , UnipolSAI  US.MI , as well as Germany's
Allianz  ALVG.DE , in June agreed to take over Eurovita
policies.
    Contrary to the initial scheme, Allianz is taking 10% and
not 20%, with the other four filling the gap, two people close
to the matter said. The insurers involved declined to comment.
    ($1 = 0.9437 euros)

 (Reporting by Valentina Za and Emilio Parodi; Editing by Josie
Kao)
 ((valentina.za@thomsonreuters.com; +39 02 6612 9526;))