ADDISON, Texas, Sept. 16, 2013 (GLOBE NEWSWIRE) -- Affirmative Insurance Holdings, Inc. (OTCQB:AFFM), a leading distributor and producer of non-standard personal automobile insurance policies, announced that it has entered into a definitive agreement to sell its retail agency distribution business to Confie Seguros, a leading California-based national insurance distribution company, for $100 million in cash with the potential to receive an additional $20 million of cash proceeds. Affirmative's retail agency business consists of 195 retail locations in Louisiana, Alabama, Texas, Illinois, Indiana, Missouri, Kansas, South Carolina and Wisconsin and two premium finance companies. The retail agency business employs approximately 500 employees.
The initial $100 million of cash proceeds will include $20 million to be placed in an escrow account that will, dependent upon the risk-based capital status of Affirmative Insurance Company (AIC), be utilized to either infuse capital into AIC or pay down debt. The risk-based capital measurement will be made quarterly as of September 30, 2013 through June 30, 2014. The Company expects to pay down about $72 million of its current $119 million senior debt obligation with the net proceeds available after the $20 million is placed into escrow and transaction expenses.
In addition, the Company may receive up to an additional $20 million of proceeds that could be used to pay down debt or infuse capital into AIC. The additional proceeds are contingent on AIC meeting certain risk-based capital thresholds. The measurement begins as of June 30, 2014 and can be achieved quarterly through December 31, 2015. In the best case scenario, the Company would receive an additional $10 million of proceeds based on the risk-based capital measurement as of June 30, 2014 and an additional $10 million of proceeds based on the measurement as of September 30, 2014.
The Company has also entered into a commitment letter for a $31 million senior secured term loan facility with a maturity date of November 30, 2014, and a $16 million subordinated secured term loan facility with a maturity date of June 30, 2015. Fortress Credit Corp. will participate in both facilities, and JCF AFFM Debt Holdings L.P., an affiliate of J.C. Flowers & Co. LLC and New Affirmative LLC, the Company's 51.0% majority shareholder, will participate in the subordinated secured term loan facility. The new financing is intended to completely replace the Company's existing senior secured loan facility and is expected to close when the retail sale closes.
Mike McClure, Acting Chief Executive Officer, stated "Although the retail business has been a valuable part of Affirmative, this transaction will allow us to address our senior debt maturity issue as our senior debt was set to mature in January 2014. The transaction will also allow us to focus on our insurance production business, which has significantly improved from both a revenue and profitability perspective. Lastly, we will also be entering into a distribution agreement with Confie Seguros and are hopeful that this is the beginning of a long-term partnership with a great distribution company in the non-standard automobile insurance marketplace."
Affirmative will continue to own and operate the retail business until the closing date of the sale. The sale of the retail business and new financing are expected to be completed within 30 days.
