Covéa’s $9bn deal to acquire PartnerRe called off

BY Fraser Tennant

Citing market dislocation caused by the coronavirus (COVID-19) pandemic, French insurer Covéa has abandoned a $9bn deal to purchase PartnerRe, a Bermuda-based reinsurer owned by investment holding company Exor.

The deal to acquire PartnerRe is the biggest involving a European buyer to collapse due to the COVID-19 pandemic, which has made it increasingly difficult for bidders to close pre-crisis transactions due to drops in share price.

“In view of the unprecedented current conditions and the significant uncertainties weighing on the global economic outlook, we have told Exor that the context does not allow the proposed acquisition of PartnerRe to be carried out on the terms initially envisaged,” explained Covéa in a statement.

In response, Exor, the holding firm of Italy’s Agnelli family, acknowledged the French insurer’s notice that it will not honour its commitment to acquire PartnerRe in accordance with the terms of the Memorandum of Understanding (MOU) announced on 3 March 2020. Furthermore, the Exor board of directors expressed its strong belief that a sale of PartnerRe on terms inferior to those established in the MOU fails to reflect the value of the reinsurer.

“In attempting to renegotiate the agreed deal terms, Covéa has never suggested the existence of a material adverse change, including pandemic risk, or any other issues at PartnerRe that would explain its refusal to honour its commitments under the MOU and we believe that no such basis exists,” said Exor in a separate statement.

The Exor board also stated that PartnerRe, which enjoys one of the highest capital and liquidity ratios in the global reinsurance industry, is not expected to be significantly affected by the COVID-19 outbreak.

An Exor spokesperson said that Covéa is required to pay an indemnity, although the amount due is confidential. However, the MoU between Covéa and Exor stipulated a $175m penalty should Covéa pull out of the deal.

News: France's Covea backs out of $9 billion purchase of Exor's PartnerRe

Avianca files for Chapter 11 bankruptcy

BY Richard Summerfield

Avianca Holdings, the second largest airline in Latin America, has filed for Chapter 11 bankruptcy protection after failing to meet a bond payment deadline, while its pleas for COVID-19 aid from Colombia’s government have so far been unsuccessful.

The company filed for bankruptcy in a court in New York on Sunday as the coronavirus outbreak continues to impact the aviation industry. Global air travel has fallen by 90 percent since the outbreak, according to the International Air Transport Association. The body predicts Latin American airlines will lose $15bn in revenues this year – the biggest drop in the industry’s history.

“Avianca is facing the most challenging crisis in our 100-year history as we navigate the effects of the COVID-19 pandemic,” said Anko van der Werff, chief executive of Avianca. “Despite the positive results yielded by our ‘Avianca 2021’ plan, we believe that, in the face of a complete grounding of our passenger fleet and a recovery that will be gradual, entering into this process is a necessary step to address our financial challenges.

“When government-mandated air travel restrictions are lifted and we are able to gradually resume our passenger flights, we look forward to welcoming back our furloughed employees and playing a leading role in restarting the economy in Colombia and our other key markets,” he continued. “We greatly appreciate the dedication of our employees to Avianca and to serving the more than 30 million passengers that fly our airline each year. We remain committed to our purpose to connect people, families and businesses.”

Undoubtedly, the COVID-19 crisis has not helped matters. Avianca has not flown a regularly scheduled passenger flight since late March and most of its 20,000 employees have gone without pay through the crisis. Furthermore, the pandemic has cut more than 80 percent of Avianca’s income, and the company has been struggling with high fixed costs. It had debts of $7.3bn in 2019.

Avianca previously filed for bankruptcy in the early 2000s and was rescued by a deal with Bolivian oil tycoon German Efromovich.

News: World's second-oldest airline, Avianca, driven to bankruptcy by coronavirus

Gold’s Gym files for Chapter 11 bankruptcy

BY Richard Summerfield

Prominent US gym chain Gold’s Gym has filed for Chapter 11 bankruptcy protection in Dallas as it has been unable to keep up with debt payments after the prolonged shutdown caused by the COIVD-19 outbreak. The company listed assets and liabilities of around $100m, according to court papers.

In April, Gold’s Gym permanently closed about 30 company-owned locations due to the COVID-19 outbreak and said that the decision to close the locations was made “to maintain the strength and growth of the potential of the brand as well as ensure the continued viability of the company for decades to come”.

According to Gold’s Gym, the Chapter 11 filing will not have a further impact on its current operations and it plans to emerge from bankruptcy by August.

“We want to be 100 percent clear that Gold’s Gym is not going out of business,” said Adam Zeitsiff Gold’s Gym’s president and chief executive. “The brand is strong, and we’ll continue to innovate and grow our digital business, our licensing program and our global footprint as we focus on serving our millions of members across the world.”

“The company will be seeking court approval to continue paying suppliers, vendors, and employees in the ordinary course on a go-forward basis,” the company said in a statement. “No single factor has caused more harm to our business than the current COVID-19 global pandemic. This has been a complete and total disruption of every one of our business norms, so we needed to take quick, decisive actions to enable us to get back on track.”

Gold’s Gym operates more than 700 gyms around the world, according to its website, which also noted that gyms owned by franchisees will not be affected by the restructuring.

The company will also try to sell itself under terms proposed by TRT Gym Asset Holdings LLC, according to the court documents. TRT Holdings Inc., the majority shareholder of Gold’s Gym, is in discussions with the company over the terms of a debtor-in-possession and exit loan to get it through the restructuring.

News: Gold’s Gym files for bankruptcy protection

Mirae Asset pulls plug on $5.8bn US hotels deal

BY Fraser Tennant

Citing a breach of contract obligations, global investments company Mirae Asset has pulled out of a $5.8bn deal to acquire 15 US-located luxury hotels from Chinese insurer AnBang Insurance Group.

The South Korea-based Mirae said that Anbang – one of the largest insurance groups in China with a global network of over 30 million customers – had failed to remedy breaches of certain obligations regarding the acquisition, resulting in the termination of the transaction. AnBang bought the hotels for $6.5bn in March 2016 from US private equity firm Blackstone.

In September 2019, a consortium led by Mirae agreed to buy the hotels in New York, San Francisco, Los Angeles and other locations, from Anbang, which had been selling some of its overseas assets. The Chinese government took control of the insurer in 2018 after it took on too much debt. Chinese authorities also sentenced AnBang chairman Wu Xiaohui to 18 years in prison for fraud.

The transaction, in which Mirae placed a 10 percent deposit, had originally been scheduled to close on 17 April 2020.

“Among other things, AnBang had failed to timely disclose and discharge various material encumbrances and liabilities impairing the hotels and failed to continue the operation of the hotels in accordance with contractual requirements,” explained Mirae in a statement. “Mirae Asset will protect its rights vigorously in accordance with the terms of the agreement.”

For its part, AnBang has filed litigation against Mirae and affiliated entities in the US, claiming that Mirae’s decision to terminate the transaction is itself a violation of the deal and that AnBang did not breach any contractual obligations, a claim the asset manager denies. In its lawsuit filing, AnBang stated that it “seeks an order forcing defendants to specifically perform their obligations under a sale and purchase agreement and certain equity commitment letters”.

The collapse of the Mirae/AnBang deal is the latest M&A transaction to be impacted by the coronavirus (COVID-19) pandemic. The travel and tourism industries have been hit particularly hard, with hotels in affected regions seeing sharp declines in bookings.

News: Mirae Asset scraps $5.8 billion deal to buy U.S. hotels from China's Anbang

Diamond Offshore files for Chapter 11

BY Fraser Tennant

Blaming the impact of an oil price war and coronavirus (COVID-19) pandemic, offshore drilling contractor Diamond Offshore Drilling, Inc., along with 15 of its subsidiaries, has filed for Chapter 11 bankruptcy. The company has debts of more than $2.6bn.

Diamond intends to use the bankruptcy proceedings to restructure and strengthen its balance sheet and achieve a more sustainable debt profile, while continuing to focus on safe, reliable, and efficient contract drilling services for its global clients.

In addition, Diamond and its advisers – Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel, Alvarez & Marsal as restructuring adviser and Lazard Frères & Co. LLC as financial adviser – are pursuing negotiations with its key stakeholders regarding a comprehensive restructuring plan to address the capital structure.

“After a careful and diligent review of our financial alternatives, the board of directors and management, along with our advisers, concluded that the best path forward for Diamond and its stakeholders is to seek Chapter 11 protection,” said Marc Edwards, president and chief executive of Diamond. “Through this process, we intend to restructure our balance sheet to achieve a more sustainable debt level to reposition the business for long-term success.”

Diamond has sufficient capital to fund its global operations in the ordinary course and to make continued investments in safety and reliability during the reorganisation proceedings and does not require additional post-petition financing. “Our clients and vendors should expect business as usual across our organisation as our world class team will stay steadfast on our collective goal of providing superior operations that clients have come to expect from Diamond,” added Mr Edwards.

A leader in offshore drilling, Diamond provides innovation, thought leadership and contract drilling services to the energy industry. With a total fleet of 15 offshore drilling rigs, consisting of 11 semisubmersibles and four dynamically positioned drillships, the company solves complex deepwater challenges around the globe.

Mr Edwards concluded: “Diamond remains focused on maintaining its high standards as it relates to safety and operational excellence during the Chapter 11 process.

News: Diamond Offshore files for bankruptcy, citing 'price war,' coronavirus