Syncora Holdings US Inc. Announces Private Exchange Offers For Syncora Guarantee Inc.'s Outstanding 6% Surplus Notes Due 2024 and 5% Surplus Notes Due 2011 and Syncora Holdings Ltd. Announces Special General Meeting of Preferred Shareholders

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Jul 08, 2016, 08:32 ET

NEW YORK, July 8, 2016 /PRNewswire/ -- Syncora Holdings US Inc. ("SHI" or the "Offeror"), a wholly-owned subsidiary of Syncora Holdings Ltd. ("SHL" and, together with its subsidiaries, the "Company"), today announced that on July 8, 2016, it commenced private offers to exchange (the "Exchange Offers") up to $55,164,182 (including accrued and unapproved interest) of Syncora Guarantee Inc.'s ("SGI") outstanding 6% Surplus Notes due 2024 (the "Existing Long-Term Surplus Notes" and the "SGI Long-Term Surplus Notes Exchange Offer") and up to $14,835,818 (including accrued and unapproved interest) of SGI's outstanding 5% Surplus Notes due 2011 (the "Existing Short-Term Surplus Notes" and the "SGI Short-Term Surplus Notes Exchange Offer") for the consideration set forth in the table below. The Existing Short-Term Surplus Notes and the Existing Long-Term Surplus Notes are referred to collectively as the "Existing SGI Surplus Notes". Concurrently with the Exchange Offers, SHL is soliciting proxies (each an "SHL Preferred Proxy" and together the "SHL Proxies" and such solicitation, the "SHL Preferred Proxy Solicitation") from the holders of SHL's outstanding Fixed/Floating Series A Perpetual Non-Cumulative Preference Shares, par value US$0.01 (the "Existing SHL Preferred Shares" and together with the Existing Surplus Notes, the "Existing Securities") to vote in favor of a resolution that will vary the terms attached to the Existing SHL Preferred Shares (the "SHL Preferred Amendment"). Only Eligible Holders (as defined below) of Existing Securities will be authorized to participate in the Exchange Offers and/or participate in the SHL Preferred Proxy Solicitation, as applicable.

Eligible Surplus Noteholders and Preferred Shareholders

The Exchange Offers are being made, the SHL Preferred Proxies are being solicited from, and the New Securities are being offered and issued only (a) in the United States, to holders of Existing Securities who are "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) or institutional "accredited investors" within the meaning of subsection (1), (2), (3), or (7) of Rule 501(a) under the Securities Act and (b) outside the United States, to holders of Existing Securities who are not "U.S. persons" (as defined in Rule 902 under the Securities Act) in reliance on Regulation S of the Securities Act (such holders, "Eligible Holders"). Only Eligible Holders who have provided such confirmation are authorized to receive or review the Offering Memorandum or to participate in the SHL Preferred Proxy Solicitation made thereby.

Transaction Support Agreement

As announced by the Company on July 1, 2016, certain holders of Existing SGI Surplus Notes and Existing SHL Preferred Shares have agreed to support the Exchange Offers and the SHL Preferred Amendment (the "Restructuring Transactions") and have signed and become party to a transaction support agreement, dated as of June 30, 2016 (the "Transaction Support Agreement"). These holders represent 83% of the Existing SGI Surplus Notes (excluding Existing SGI Surplus Notes held by the Company) and 85% of the Existing SHL Preferred Shares (excluding Existing SHL Preferred Shares held by the Company).

Exchange Offers

The new common shares of SHL, par value US$0.01 to be issued as part of the Restructuring Transactions are referred to as the "New SHL Common Shares" and the amount of the Existing SGI Surplus Notes received by the holders of the Existing SHL Preferred Shares upon conversion of the Existing SHL Preferred Shares pursuant to the SHL Preferred Amendment (as defined below) are referred to as the "Reallocated Surplus Notes" and together with the New SHL Common Shares, the "New Securities".

Existing SGI Surplus Notes to be Exchanged(3)	Aggregate Outstanding Principal Amount (including Paid-in-kind Interest) Owned by Third Parties(1)	Number of New SHL Common Shares for each $1 of Principal Amount, (including Paid-in-kind Interest), of Existing SGI Surplus Notes Tendered(2)	Exchange Cap (excluding accrued and unapproved interest) (assumes July 29, 2016 Settlement Date and 100% participation of Existing SGI Surplus Notes Owned by Third Parties)(8)
Syncora Guarantee Inc.'s 6% Surplus Notes due 2024	$574,944,298	0.301997 common shares of par value $0.01 per share in the capital of SHL (4)(6)(7)	$45,835,257
Syncora Guarantee Inc.'s 5% Surplus Notes due 2011	$144,197,488	0.301997 common shares of par value $0.01 per share in the capital of SHL (5)(6)(7)	$11,495,599

(1) Does not include securities owned by Syncora Holdings Ltd.'s subsidiaries, which as of the date hereof consists of $21,217,189 of principal (including paid-in-kind interest) on Existing Short-Term Surplus Notes and $27,159,309 of principal (including paid-in-kind interest) on Existing Long-Term Surplus Notes. The Company will not tender the Existing SGI Surplus Notes that it holds in the Exchange Offers.

(2) The exchange ratios and exchange cap amounts set forth below assume that (a) the Exchange Offers are consummated on July 29, 2016 (accrued and unapproved interest are calculated through the date of such consummation) and (b) all holders of Existing SGI Surplus Notes (other than the Company) participate in the Exchange Offers, and the actual ratios and exchange cap amounts (including the exchange cap components of principal, paid-in-kind interest and accrued and unapproved interest) will differ based on the actual date of consummation and the actual level of participation, but in any event, a total of 17,313,728 New SHL Common Shares (representing 20% of the total SHL Common Shares outstanding immediately following the closing of the Restructuring Transactions) will be issued in the Exchange Offers in exchange for the $70 million exchange cap.

(3) Includes right to payment of any accrued, unapproved and unpaid interest on the portion of principal amount of Existing SGI Surplus Notes accepted. The aggregate accrued, unapproved and unpaid interest as of June 30, 2016 was $41,152,507 on the Existing Short-Term Surplus Notes and $113,692,606 on the Existing Long-Term Surplus Notes, respectively, excluding securities held by SGI.

(4) Holders who tender in the Exchange Offers will not receive any additional payments of principal or interest on the portion of principal amount of the Existing Long-Term Surplus Notes accepted. Eligible holders of Existing Long-Term Surplus Notes who wish to participate in the SGI Long-Term Surplus Notes Exchange Offer will be required to physically tender all of their Existing Long-Term Surplus Notes. If the Conditions Precedent, including the Existing SGI Surplus Notes Minimum Condition (as defined below), are satisfied or waived, the Offeror will accept each eligible holder's pro rata portion of the exchange cap of $55,164,182 of Existing Long-Term Surplus Notes applied against principal, paid-in-kind interest and accrued and unapproved interest on such principal and paid-in-kind interest, and return the remaining principal amount, paid-in-kind interest, and accrued and unapproved interest, of Existing Long-Term Surplus Notes tendered by such eligible holder to such eligible holder. The Existing Long-Term Surplus Notes exchange cap of $55,164,182 is comprised of principal amount (including paid-in-kind interest) of $45,835,257 with associated accrued and unapproved interest of $9,328,925.

(5) Holders who tender in the Exchange Offers will not receive any additional payments of principal or interest on the portion of the Existing Short-Term Surplus Notes accepted. Eligible holders of Existing Short-Term Surplus Notes who wish to participate in the SGI Short-Term Surplus Note Exchange Offer will be required to tender all of their Existing Short-Term Surplus Notes. If the Conditions Precedent, including the Existing SGI Surplus Notes Minimum Condition, are satisfied or waived, the Offeror will accept each eligible holder's pro rata portion of the exchange cap of $14,835,818 of Existing Short-Term Surplus Notes applied against principal, paid-in-kind interest and accrued and unapproved interest on such principal and paid-in-kind interest, and return the remaining principal amount, paid-in-kind interest, and accrued and unapproved interest, of Existing Short-Term Surplus Notes tendered by such eligible holder to such eligible holder. The Existing Short-Term Surplus Notes exchange cap of $14,835,818 is comprised of principal amount (including paid-in-kind interest) of $11,495,599 with associated accrued and unapproved interest of $3,340,219.

(6) As an example of how the exchange mechanics in the Exchange Offers will work, assume the following: (i) $1,000 outstanding principal amount (including paid-in-kind interest), (ii) one hundred holders, three of which are Holders A, B and C, holding $500, $250 and $200, respectively, and the other 97 holders collectively hold 5% and (iii) the Company seeks to exchange $70 of aggregate principal amount (including paid-in-kind interest) with 100% participation. Under this mechanic, all holders are required to tender the full amount of their notes. The Company would, in addition to the other consideration offered in the Exchange Offer as described herein, return to Holder A its note now representing $465 principal amount (including paid-in-kind interest); to Holder B its note now representing $232.50 principal amount (including paid-in-kind interest); and to Holder C its note now representing $186 principal amount (including paid-in-kind interest). Assume instead that the Company seeks to exchange $70 of aggregate principal amount, paid-in-kind interest, and accrued and unapproved interest with 95% participation and Holder A, Holder B and Holder C tender their notes, and the other 97 holders do not tender. The Company would, in addition to the other consideration offered in the Exchange Offer as described herein, return to Holder A its note now representing $463.15 principal amount (including paid-in-kind interests); Holder B its note now representing $231.59 principal amount (including paid-in-kind interest); and to Holder C its note now representing $185.26 principal amount (including paid-in-kind interest).

(7) Represents (if expressed as a number of shares per $1 of obligations that include accrued and unapproved interest) 0.247339 New SHL Common Shares for each $1 of the sum of (A) principal amount (including paid-in-kind interest) and (B) accrued and unapproved interest thereon.

(8) The exchange cap (including accrued and unapproved interest) is $55,164,182 for the Existing Long-Term Surplus Notes and $14,835,818 for the Existing Short-Term Surplus Notes (assuming a settlement date of July 29, 2016 and 100% participation of Existing SGI Surplus Notes owned by third parties).

The Exchange Offers are scheduled to expire at 12:00 noon, New York City time, on August 5, 2016 (as such date and time may be extended or earlier terminated, the "Expiration Time").

Upon the terms and subject to the conditions of the SGI Long-Term Surplus Notes Exchange Offer, for each $1 of principal amount (including paid-in-kind interest) of Existing Long-Term Surplus Notes validly tendered and accepted by the Offeror, in the SGI Long-Term Surplus Notes Exchange Offer at or prior to the Expiration Time, eligible holders will receive 0.301997 New SHL Common Shares, which represents (if expressed as a number of shares per $1 of obligations that include accrued and unapproved interest) 0.247339 New SHL Common Shares for each $1 of the sum of (A) principal amount (including paid-in-kind interest) and (B) accrued and unapproved interest thereon. Eligible holders of Existing Long-Term Surplus Notes who wish to participate in the SGI Long-Term Surplus Note Exchange Offer will be required to physically tender all of their Existing Long-Term Surplus Notes. If the Conditions Precedent, including the Existing SGI Surplus Notes Minimum Condition, are satisfied or waived, the Offeror will accept each eligible holder's pro rata portion of the exchange cap of $55,164,182 applied against principal, paid-in-kind interest and accrued and unapproved interest on such principal and paid-in-kind interest and return the remaining principal amount, paid-in-kind interest and accrued and unapproved interest of Existing Long-Term Surplus Notes tendered by such eligible holder to such eligible holder. The Existing Long-Term Surplus Notes exchange cap, assuming 100% participation by holders of Existing SGI Surplus Notes, of $55,164,182 is comprised of principal amount (including paid-in-kind interest) of $45,835,257 with associated accrued and unapproved interest of $9,328,925.

Upon the terms and subject to the conditions of the SGI Short-Term Surplus Notes Exchange Offer, for each $1 of principal amount (including paid-in-kind interest) validly tendered and accepted by the Offeror, in the SGI Short-Term Surplus Notes Exchange Offer at or prior to the Expiration Time, eligible holders will receive 0.301997 New SHL Common Shares, which represents (if expressed as a number of shares per $1 of obligations that include accrued and unapproved interest) 0.247339 New SHL Common Shares for each $1 of the sum of (A) principal amount (including paid-in-kind interest) and (B) accrued and unapproved interest thereon. Eligible holders of Existing Short-Term Surplus Notes who wish to participate in the SGI Short-Term Surplus Note Exchange Offer will be required to physically tender all of their Existing Short-Term Surplus Notes. If the Conditions Precedent, including the Existing SGI Surplus Notes Minimum Condition, are satisfied or waived, the Offeror will accept each eligible holder's pro rata portion of the exchange cap of $14,835,818 applied against principal, paid-in-kind interest and accrued and unapproved interest on such principal and paid-in-kind interest and return the remaining principal amount, paid-in-kind interest and accrued and unapproved interest of Existing Short-Term Surplus Notes tendered by such eligible holder to such eligible holder. The Existing Short-Term Surplus Notes exchange cap, assuming 100% participation by holders of Existing SGI Surplus Notes, of $14,835,818 is comprised of principal amount (including paid-in-kind interest) of $11,495,599 with associated accrued and unapproved interest of $3,340,219.

The exchange cap (assuming 100% participation) for the SGI Long-Term Surplus Notes Exchange Offer is $55,164,182, the exchange cap (assuming 100% participation) for the SGI Short-Term Surplus Notes Exchange Offer is $14,835,818 and the total exchange cap for the Exchange Offers is $70 million.

The consummation of the Exchange Offers is conditioned upon, among others, the valid tender of at least $860,498,687 comprising principal, paid-in-kind interest and accrued and unapproved interest (or 98% of the outstanding amount including principal, paid-in-kind interest and accrued and unapproved interest (computed through June 29, 2016) owned by holders other than the Company) of Existing SGI Surplus Notes in the Exchange Offers (the "Existing SGI Surplus Notes Minimum Condition").

Consummation of the Exchange Offers is also conditioned upon the satisfaction or waiver of, among other things, amendment of the Tax Sharing Agreement, the SHL Preferred Amendment, approval from the NYDFS, payment of $55 million on Existing SGI Surplus Notes (other than those held by SGI) that the Restructuring Transactions will not result, as determined by the Company in its good faith, in aggregate cumulative "owner shifts" in excess of 38.5 percentage points for purposes of Section 382, consent by more than 50% in value of the Existing Short-Term Surplus Notes and more than 50% in value of the Existing Long-Term Surplus Notes to the waiver of certain provisions of that certain master transaction agreement, dated April 26, 2009, by the Company, and certain customary closing conditions (the foregoing conditions precedent are collectively referred to as the "Conditions Precedent").

Moelis & Company and Odeon Capital Group LLC are acting as co-dealer managers for the Exchange Offers. Holders of Existing SGI Surplus Notes wishing to certify that they are Eligible Holders and receive a copy of the Offering Memorandum and Letter of Transmittal should contact the Information Agent for the Exchange Offers, Georgeson LLC, at (800) 261-1052 (Toll-Free) or via email at [email protected] to confirm their eligibility.

Holders that are U.S. persons and not qualified institutional buyers will not be able to receive the Offering Memorandum, but SHI may make alternative arrangements available to ensure that they can participate. Such holders should contact Georgeson LLC and will receive information about alternative arrangements available to them, if any.

SHL Preferred Amendment

The SHL Preferred Proxy Solicitation provides that the business day following the expiration of the Exchange Offers, on August 8, 2016, SHL will call and hold a special general meeting of the holders of the Existing SHL Preferred Shares (the "Special General Meeting"). At the Special General Meeting, holders of Existing SHL Preferred Shares will vote, in person or by proxy, on a variation of rights attached to the Existing SHL Preferred Shares that provides that (A) each of the Existing SHL Preferred Shares held by SHL or its subsidiaries and affiliates (the "Excluded Shares") shall without any action on the part of the holder thereof, be either: (i) acquired by SHL pursuant to section 42B of the Bermuda Companies Act 1981, as amended and (ii) immediately thereafter cancelled, and shall cease to exist, and no Variation shall be deemed to occur in respect of the terms attached to the Excluded Shares and (B) the rights attached to the Existing SHL Preferred Shares (other than the Excluded Shares) will be varied such that at the Settlement Date each such Existing SHL Preferred Shares (other than the Excluded Shares) shall automatically be converted into (a) 78.5 New SHL Common Shares and (b) $51.25 principal amount of Existing Short-Term Surplus Notes and $190.56 principal amount of Existing Long-Term Surplus Notes (the "SHL Consideration"). Eligible Holders holding a majority of the Existing SHL Preferred Shares that attend the Special General Meeting in person or by proxy must vote in favor of the SHL Preferred Amendment for it to become operative. Holders of more than 9.5% of the Existing SHL Preferred Shares will be subject to a voting cutback. Any holder of Existing SHL Preferred Shares that is not an eligible holder may attend the Special General Meeting and vote in person. The parties to the Transaction Support Agreement (other than the Company), who have agreed under the Transaction Support Agreement to vote in favor of the SHL Preferred Amendment, hold more than a majority of the Existing SHL Preferred Shares, which would be sufficient to establish a quorum at the Special General Meeting and would also constitute a majority of the votes cast at the Special General Meeting even if all other holders of Existing SHL Preferred Shares were to attend the Special General Meeting and vote against the SHL Preferred Amendment. SHL and its subsidiaries do not intend to attend the Special General Meeting in their capacity as a holder of Existing SHL Preferred Shares or to vote the Existing SHL Preferred Shares held by them at the Special General Meeting and all of the Existing SHL Preferred Shares held by SHL and its subsidiaries would be cancelled as a result of the Restructuring Transactions.

The consummation of the SHL Preferred Amendment is conditioned upon, among others, the valid grant of proxies of a sufficient number of Existing SHL Preferred Shares to (i) achieve a quorum for the Special General Meeting and (ii) have a majority of Existing SHL Preferred Shares voted at the Special General Meeting vote in favor of the SHL Preferred Amendment, which number, in the case of (i) and (ii), is satisfied by eligible holders, irrespective of any participation at the Special General Meeting by Ineligible SHL Preferred Holders (and would also have been so satisfied if any Ineligible SHL Preferred Holders who provide confirmation of their status as Ineligible SHL Preferred Holders had actually participated at the Special General Meeting), including the satisfaction of such condition at an adjourned Special General Meeting (collectively, the "Existing SHL Preferred Shares Minimum Condition").

The purposes of the Special General Meeting will be:

To vote on a variation of rights attached to the Existing SHL Preferred Shares such that all issued and outstanding Existing SHL Preferred Shares (other than the Excluded Shares) shall automatically be converted into the right to receive the SHL Consideration (the "Variation");
To approve the adjournment of the Special General Meeting, if necessary or appropriate, to solicit additional SHL Proxies if there are not sufficient votes to approve the Variation; and
To transact such other business as may properly come before the meeting or any adjournments thereof.

Only Shareholders of record, shown by the Register of Shareholders and the records of the Depository Trust & Clearing Corporation at the close of business on July 5, 2016, are entitled to receive notice of and vote at the Special General Meeting. Notice was first mailed to Shareholders on July 8, 2016.

The implementation of the SHL Preferred Amendment shall be conditional upon:

the passing of the SHL Preferred Amendment;
the satisfaction of the Conditions Precedent; and
the quorum required for, and the requisite majority of votes cast at, the Special General Meeting being satisfied by Eligible Holders, irrespective of any participation at the Special General Meeting by Ineligible SHL Preferred Holders (and would also have been so satisfied if any Ineligible SHL Preferred Holders who provide confirmation of their status as Ineligible SHL Preferred Holders had actually participated at the Special General Meeting).

If the SHL Preferred Amendment is implemented, Existing SHL Preferred Shares held by Eligible Holders and Ineligible SHL Preferred Holders will be converted into the SHL Consideration regardless of whether such Eligible Holder or Ineligible SHL Preferred Holder voted for the SHL Preferred Amendment.

Moelis & Company and Odeon Capital Group LLC are acting as co-financial advisors with respect to the SHL Preferred Proxy Solicitation. Holders of Existing SHL Preferred Shares wishing to certify that they are Eligible Holders and receive a copy of the Offering Memorandum and Proxy, should contact the Solicitation Agent for the SHL Preferred Proxy Solicitation, Georgeson LLC, at (866) 357-4029 (Toll-Free) or via email at [email protected] to confirm their eligibility.

Holders that are U.S. persons and not qualified institutional buyers or institutional "accredited investors" will not be able to receive the Offering Memorandum, but may vote in person at the Special General Meeting.

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 for informational purposes only and 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.

The Exchange Offers are being made, the SHL Preferred Proxy is being solicited from, and the New Securities are being offered and issued only (a) in the United States, to holders of Existing Securities who are "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) or institutional "accredited investors" within the meaning of subsection (1), (2), (3), or (7) of Rule 501(a) under the Securities Act and (b) outside the United States, to holders of Existing Securities who are not "U.S. persons" (as defined in Rule 902 under the Securities Act) in reliance on Regulation S of the Securities Act. The New Securities have not been registered under the Securities Act or under any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act, and accordingly, are subject to significant restrictions on transfer and resale as more fully described in the Offering Memorandum and the Letter of Transmittal. The Exchange Offers are subject to the terms and conditions set forth in the Offering Memorandum and the Letter of Transmittal.

None of the Company, SHI, SGI, their respective boards of directors, the information agent, the exchange agent, the solicitation agent or the fiscal agent for the surplus notes is making any recommendation as to whether holders should tender surplus notes in response to the exchange offer or provide their proxy to SHL. Holders must make their own decisions as to whether to tender surplus notes or provide their proxy.

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. The Company cautions you that the forward-looking information presented in this press release are 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.