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

Published 09/26/2023, 12:47 PM
Updated 09/27/2023, 11:11 AM
© Reuters. FILE PHOTO: A view of the financial district in London, Britain. September 23, 2023. REUTERS/Matthew Childs/File Photo
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By Valentina Za and Emilio Parodi

MILAN (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 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.

The tender bid's document shows showed a vehicle owned by Cinven offered 350 euros to repurchase 1,000 euros worth of bonds, with a 65% discount to the nominal value.

The offer aims to "to offer liquidity to holders and to assist in ensuring an orderly resolution of the issuer's liabilities," the document 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 off 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 (BIT:GASI), PosteVita, Intesa Sanpaolo (OTC:ISNPY) Vita, UnipolSAI, as well as Germany's Allianz (ETR:ALVG), in June agreed to take over Eurovita policies.

© Reuters. FILE PHOTO: A view of the financial district in London, Britain. September 23, 2023. REUTERS/Matthew Childs/File Photo

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)

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