Sirius International Insurance Group Ltd. stock dropped almost 17% to close at $7.25 on March 4 after the company disclosed details of a dispute with its controlling shareholder, China Minsheng Investment Group.
China Minsheng owns nearly 82% of CMIG International Holding Pte. Ltd., which indirectly holds about 96% of Sirius' common shares through its ownership of CM Bermuda Ltd.
On Feb. 25, the shareholder executed a written resolution requiring the Sirius board to call for a shareholder vote before taking any actions related to the company's securities, such as issuing common shares, warrants, options or other forms of share equity, granting any new share rights or implementing any rights plan.
Sirius disclosed in a filing that its financial condition and business prospects could be "materially harmed" if the shareholder withholds its support for raising capital, incentivizing employees with company shares, or executing equity-based financing or transactions.
In light of the written resolution, the Sirius board engaged Barclays Capital Inc. to review the terms of a planned rights offering that the shareholder blocked and compare it with other strategic alternatives that will allow the company to raise capital and improve liquidity.
Following the announcement, A.M. Best downgraded Sirius' and Sirius International Group Ltd.'s long-term issuer credit rating to "bbb-" from "bbb." The agency also downgraded the financial strength ratings to A- from A and the long-term issuer credit ratings to "a-" from "a" of Sirius Bermuda Insurance Co. Ltd., Sirius International Insurance Corp. and Sirius America Insurance Co.
A.M. Best said the development could negatively affect Sirius' business profile and put a strain on management's time and resources when the focus should be on addressing the deterioration in the company's operating performance. The rating agency also placed the credit ratings under review with negative implications as it needs to determine whether Sirius can safeguard the independence of its operations from the shareholder.
Additionally, S&P Global Ratings placed the BBB rating of Sirius International Group and the A- ratings of the company's core operating subsidiaries on CreditWatch with negative implications. The rating agency said Sirius' standing would be negatively affected if the issue with the shareholder escalates.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.