KBRA Affirms Rating for HG Global Ltd.
29 Mar 2024 | New York
KBRA affirms the issuer rating of BBB- for HG Global Ltd. ("HG Global") and the long-term credit rating of BBB for the $150 million Senior Secured Term Loan. The Outlook for both ratings is Stable.
The Term Loan (the “Loan”) is secured by a first priority interest in the capital stock of HG Global’s wholly-owned subsidiary HG Holdings Ltd. (“HG Holdings”) which in turn has access to (i) all accrued interest on Build America Mutual’s ("BAM")surplus notes that is held outside of the collateral trusts and (ii) all releases of excess funds from the collateral trusts at its wholly owned reinsurance subsidiary HG Re Ltd. The transaction requires the maintenance of an Interest Reserve Account containing eight quarters of interest payments, which serves as a liquidity buffer at the HG Global level to cover potential timing mismatches from available cash flows and debt service on the Loan. In addition, HG Global implemented an inter-company borrowing agreement for up to $25 million which is utilized for cash management purposes.
KBRA’s rating is based on the transaction structure combined with a quantitative analysis of the insured portfolio of BAM and the associated projected cash flows to HG Global for the Loan. New business premiums, refundings and the credit risk of the insured portfolio of BAM all have a financial impact on HG Global and the timely and ultimate payment of debt service on the Loan.
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