The Chinese Fosun International Ltd. Deutsche Bank has appointed to advise on a possible sale of its stake in Hong Kong-based reinsurance company Peak Re, four people with knowledge of the matter told Reuters.
The sale comes as the tourism-to-financial conglomerate struggles with heavy debt. Ratings agency Moody’s downgraded the company’s credit rating to B2 last month and revised its outlook from ‘ratings under review’ to ‘negative’.
The Peak Re-sale plan is in its early stages and a formal process has yet to begin, two of the sources said. More financial details of the asset are expected to be sent to potential buyers by the end of the year, one added.
China’s Fosun weighs options for Hong Kong spike Re:sources
The sources declined to be named as they were not authorized to speak to the media.
Fosun and Peak Re did not immediately respond to requests for comment. Deutsche Bank declined to comment.
The Chinese conglomerate owns 86.9% of Peak Re and it’s not immediately clear what valuation a sale would attribute to the reinsurance company. Peak Re said in its 2021 annual report that total equity was $1.47 billion at the end of 2021.
Founded in 2012, Peak Re received inaugural investment in 2013 from Fosun and International Finance Corp. (IFC). Fosun invested $468 million for an 85.1% stake and IFC $81.95 million for the remainder to give the company an initial valuation of $550 million.
In 2016, Fosun invested another $100 million in Peak Re. In 2018, Prudential Financial Inc purchased a 13.1% stake in the reinsurer as IFC left, leaving Fosun with an 86.9% stake. Financial details of both transactions have not been disclosed.
Peak Re reported net income of $73.2 million for 2021, down 16% from 2020, with gross written premiums totaling $2.15 billion, up 9% year-over-year, the annual report said.
Fosun, controlled by billionaire entrepreneur Guo Guangchang, was once one of China’s most aggressive dealmakers abroad, purchasing high-profile assets including resort brand Club Med.
It has sold assets in recent months to replenish liquidity. According to data from Refinitiv, Fosun has agreed to sell or sell more than $5 billion in assets so far this year.
Moody’s said in its rating report that the company’s available cash at the holding company level would be insufficient to cover short-term debt maturing in the next 12 months.
Fosun said in October it had ended its business involvement with Moody’s rating service and had not provided any relevant information to the agency as of Oct. 12.
(Reporting by Kane Wu in Hong Kong and Andres Gonzalez in London; edited by Mark Potter)
Photo: Flags of China and the Fosun International and Forte are hoisted outside the Fosun International center in Beijing on November 15, 2021. Photo credit: TBEN Photo/Ng Han Guan.
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