May 26, 2017
Nasdaq-listed carrier AmTrust has raised $300mn of capital through family members of the company’s founders via a private placement.
In a statement issued on 25 May, the carrier said that the fresh investment would “further enhance AmTrust's balance sheet and capital base.”
The news follows troubled months for the carrier, which has included a delay in its 2016 results and an announcement that it would have to restate its financials between 2014 and the first nine months of 2016 and a note from KBW analysts speculating that AmTrust may need to take a nine-digit reserve charge in order to restore investor confidence.
“AmTrust intends to direct the proceeds from the private placement to the company's insurance subsidiaries to support their financial strength, continued organic growth, and writing of business,” it added.
The company said it would issue around 24.1 million common shares price at $12.45 a share – equivalent to the closing price of the carrier’s stock on 25 May – through a private placement, which subsequently closed on 26 May.
Although the sole purchasers were certain family members of AmTrust chairman and CEO Barry Zyskind and director George Karfunkel, neither Zyskind or Karfunkel acquired any shares themselves.
The carrier also said that the unnamed buyers have agreed not to transfer the stock for at least a year and will not exercise their right to vote their shares of common stock until after the company's 2018 annual shareholders’ meeting.
Zyskind said that family members “chose to make this investment because they believe strongly in the company's future.”
“In addition to enhancing our balance sheet and capital base, this sizeable investment of $300 million should also provide confidence to all of our stakeholders that we are well capitalized to grow and write business. We remain committed to continuing to support growth and maintain confidence in AmTrust,” he concluded.
In early May research note, KBW analyst Meyer Shields said that he was “very uncomfortable” with AmTrust’s stated reserves, suggesting that the company should take a “meaningful (ie, in the hundreds of millions of dollars) reserve charge” and commit to “much-improved disclosure” to ease investor concerns.