Corinthian agrees investor terms to replace Vesttoo LOC-linked collateral

Corinthian Group, the specialty non-catastrophe focused collateralized P&C reinsurance firm, has told its partners that it has agreed to terms on an up to $200 million injection of capital from a large investor, to replace collateral linked to Vesttoo.

Corinthian said that signatures on an agreed letter of intent are expected by next Monday at the latest and that the large investor has a verified source of funds, with up to $200 million expected to be available to replace collateral linked to letters of credit (LOCs), in a market update document seen by Artemis.

If agreed, Corinthian said that it expects the capacity would be available to it “by the end of August or middle of September at the latest”, and prior to the important Q3 reporting deadline.

The company said that the investor involved has “already reviewed extensive information regarding the Corinthian portfolio of companies and their respective programs.”

As a result, it sees the interest from the investor in replacing the potentially fraudulent and invalid LOCs linked to Vesttoo as, “a considerable vote of confidence in Corinthian and its operations.”

Corinthian said that it hopes this will provide some short and long term comfort to its trading partners, in particular as this letter of intent has been reached in a relatively short timeframe, since we’re still less than a fortnight since the fraudulent or forged letter of credit (LOC) crisis broke.

As we reported last week, Corinthian said that it is operating under the assumption that all letters of credit (LOCs) sourced from it are fraudulent.

Because of this and the fact the investigation is ongoing, Corinthian has seen providing continuity to its clients and partners as the critical goal to achieve, with replacement of Vesttoo-linked LOC collateral its main target.

In getting terms agreed on a letter of intent for investment to replace that collateral already, Corinthian will give confidence to its cedents and partners that it can ride out this issue, with the investigation still ongoing, while securing its obligations to cedents.

The company said that the capacity afforded by this letter of intent with the large investor will “provide the necessary foundation for other capacity infusion that will allow Corinthian and its partners a path to emerge from this unprecedented and unfortunate situation with the minimum harm possible.”

“To that end, Corinthian has been successful in expanding capacity from its historical and new investors and is in advanced stages of evaluating other potential solutions,” Corinthian added.

Corinthian noted that, “Remedying an alleged fraud of this magnitude and sophistication level is not an easy task.”

But said it is, “Confident that the organization and its partners are going to emerge from this situation as soon as possible and in as favorable a position as possible under the circumstances.”

Also read:

July 31st – Aon facing client & counterparty action over Vesttoo linked letters of credit.

July 28th – No comment from Aon on collateral issues, but LOCs seen as important.

July 28th – Corinthian operating under assumption all Vesttoo-sourced LOCs are fraudulent.

July 28th – Clear Blue: Over 50% of Vesttoo-linked reinsurance already replaced.

July 27th – Everest can lean in if opportunities emerge from Vesttoo collateral issue: Williamson.

July 27th – Vesttoo issue shows importance of sound counterparty risk practices: DBRS.

July 27th – Beazley CEO on Vesttoo: We would look to replace cover & recover premium.

July 26th – Clear Blue rating under review with negative implications on Vesttoo issues.

July 25th – Vesttoo: Updated statement says appears “procedures were circumvented”.

July 25th – AM Best to review fronting collateral in light of Vesttoo news.

July 25th – Fronting company Obsidian says Vesttoo exposure “de minimus”.

July 24th – Clear Blue: No material rating impact from Vesttoo issue. Reinsurance may be required.

July 21st – Vesttoo: Multiple LOCs from one bank in focus. Failure of security controls or KYC?

July 20th – MS Transverse: Any exposure to Vesttoo LOC collateral issues “immaterial”.

July 20th – Vesttoo: Collateral damage.

July 19th – Vesttoo: New report claims significant amount of forged LOCs. The question is how?

July 18th – Vesttoo faces fraudulent collateral claim. Confirms investigation, exit of some leaders.