Martello Re Seeks $800 Million Equity Amid Major Acquisitions

Key Takeaway

• Martello Re aims to raise at least $800 million in new equity, potentially increasing its capital base and AUM.
• Warburg Pincus and Temasek Holdings acquire Specialist Risk Group for over £1 billion, supporting SRG's international expansion.
• Blackstone leads a $1 billion preferred-equity investment in Press Ganey for debt refinancing, offering borrower-friendly terms amid limited investment opportunities.

Martello Re's Capital Raise

Martello Re, a Bermuda-based life and annuity reinsurance company, is in discussions to raise at least $800 million in new equity. According to sources familiar with the matter, the company has secured commitments from both new and existing investors. However, the transaction has not yet been finalized, and the capital raise could potentially be increased. Centerbridge Partners, Massachusetts Mutual Life Insurance Co. (MassMutual), and Barings were part of the consortium that launched Martello Re with an initial equity of $1.65 billion in January 2022. Representatives from Centerbridge, Martello Re, MassMutual, and Barings have not commented on the ongoing talks.

Martello Re, under the leadership of CEO Dennis Ho, has deployed over $2 billion in capital and manages more than $20 billion in assets. "We started at $14 billion of AUM, we’re at $19 billion, we started with five people, we’re at 54 people," Ho said in a January conversation with Barings' head of portfolio solutions and analytics, Colin Gordon. Ho also mentioned that the company plans to double its assets under management (AUM) over the next three to four years.

Warburg Pincus and Temasek Acquire SRG

Warburg Pincus, a private equity firm focused on growth, and Singapore’s Temasek Holdings Pte have agreed to acquire Specialist Risk Group Ltd. (SRG), an independent insurance intermediary based in London. The deal values SRG at over £1 billion ($1.27 billion), including debt. The acquisition aims to support SRG's international expansion, particularly into Europe and Asia. SRG, which was established in January 2020, employs more than 600 people and has placed premiums exceeding £1 billion.

This acquisition is part of a broader trend of consolidation in the insurance sector. For instance, Aviva Plc announced earlier this year its intention to acquire specialist insurer Probitas for £242 million. Over the past decade, larger insurers such as Catlin, Amlin, and Novae have also been acquired. Private equity firms are selectively deploying cash into companies with strong growth prospects, driven by investor pressure to generate robust returns.

Blackstone's Investment in Press Ganey

Blackstone Inc. has led a roughly $1 billion preferred-equity investment to support Press Ganey’s debt refinancing. This investment includes rare concessions that provide the company’s owners with greater flexibility to sell a stake or list the business in the coming months. The deal’s call provision allows Press Ganey to repay the obligation with proceeds from an initial public offering or minority equity investment at 101.5 cents on the dollar for up to 18 months. The rate on the preferred investment is approximately 12.5%, and Press Ganey can defer interest payments rather than paying in cash, according to a ratings report.

Blackstone is contributing about $600 million of the financing, with Oaktree Capital Management and Harvest Partners also participating. This financing reflects a broader trend of money managers offering more borrower-friendly terms to win deals amid limited investment opportunities. For example, Blackstone and Goldman Sachs Asset Management recently provided a direct loan to KKR’s Depot Connect International with a 99.75 cent issue discount, one of the smallest ever in private credit. Additionally, EQT AB is tapping a group of direct lenders for about $1 billion at one of the market's lowest rates.

Press Ganey's Financial Restructuring

Press Ganey, acquired by Ares Management Corp. and Leonard Green & Partners in 2019, recently raised a $2.2 billion loan facility in the broadly syndicated market to refinance older debt. This new capital structure is expected to reduce the company’s leverage — a measure of debt to earnings — from about 9 times to 7 times, according to a Moody’s Ratings report. S&P Global Ratings projects that Press Ganey will generate positive free operating cash flow of $15 million to $25 million for 2024 following the refinancing. Previously, S&P had anticipated the company would merely break even this year.

The competitive landscape among alternative asset managers to deploy capital is intensifying across the credit spectrum. This is evidenced by recent transactions such as Blackstone and Goldman Sachs Asset Management’s direct loan to KKR’s Depot Connect International and EQT AB’s $1 billion direct lending deal.

Management Quotes

• Dennis Ho, CEO of Martello Re:

  "We started at $14 billion of AUM, we’re at $19 billion, we started with five people, we’re at 54 people. If you look at our business plan and our growth over the next three or four years, we’ll probably double our AUM."