Refusing to Accept Defeat
Charles Blackmon had a private equity client whose lender refused to renegotiate the loan covenants of a note worth more than $150 million, and called the loan — prompting the PE firm to consider filing Chapter 11 to avoid having to pay what it felt were unreasonable terms. While the day of reckoning was 60 days away, the firm’s directors’ and officers’ insurance program renewal was immediate. Primary and excess carriers were leaning toward walking away from the client altogether, but that was not an option for Blackmon.
Blackmon, then with Equity Risk Partners, hosted numerous calls with the lender, lender’s counsel, lender’s broker, the PE firm and the underwriters. Blackmon convinced the lender and its advisers that it was in their best interest to avoid forcing the PE firm to file Chapter 11, and to write a waiver of any litigation against the company and board — which then convinced underwriters not to walk away.
“Charles Blackmon is extraordinarily professional — he knows his business cold,” a client said. “He makes outstanding presentations and returns calls immediately. He does painstaking research on everything he does and he follows up.”
“We have a very tricky corporate structure here and Charles Blackmon has been very helpful in getting more reasonable coverage and solving problems for us,” another client said.
“Charles Blackmon has provided superior service,” another client said. “We’ve had a couple of claims this year and he did a great job going to bat for us.”
A Diligent Approach
David Garrett has a foreign-based private equity client that raises money in the United States to invest in portfolio companies in its home country.
The firm’s former chief executive officer pleaded guilty to a “pay-to-play” scandal involving several state pension funds and ended his relationship with the firm.
Though much of the litigation is over, Garrett and his team picked up the account, post-scandal, and have worked closely with the firm to maintain continuity with the carriers on the original claims.
While annual renewals continue to be challenging due to the firm’s previous designation as a “distressed” financial institution, Garrett is able to continue providing the firm with a well-written program backed by several key U.S. insurance companies.
“This past year was a pretty tricky renewal with our directors’ and officers’ liability insurance, as there were some complicating factors because of our complex corporate structure,” a client said. “David Garrett took the time to understand some of the more sensitive issues, and worked very hard to educate the underwriters on the issues. That saved us money — we had an increase, but it would have been a bigger increase had he not taken the time to get the best resolution.”
“David has always done a really great job for us,” another client said. “He has a good relationship with the marketplace and is able to accomplish great things for us.”
Going to Bat for Beleaguered Clients
Last year, Neill Harman masterminded a major client renewal in circumstances where there was a rapidly deteriorating claim. While the insurers sought to revise their renewal terms on three separate occasions, Harman ensured that the client was able to resist the insurers’ wish for a blanket exclusion going forward and to avoid an additional premium clause in the event of further related claims.
Another long-term client congratulated Harman for assuming wide-ranging responsibility in the negotiation of the firm’s 2013 insurance program, involving the client only when critical decisions needed to be made. Harman also provided effective advice in the context of negotiating a claim matter. The client reinforced its satisfaction by awarding Marsh a bonus on top of the agreed fee.
Harman has also been active in advising a leading professional association and clients in the implementation of the new European Union’s Alternative Investment Fund Managers Directive.
“Neill Harman has done a terrific job helping us professionalize our approach to insurance,” a client said. “Prior to him, we relied on the broker to tell us what we needed, but Neill has worked really closely with us, to get us to tell him more about how and what we were actually doing, so that he could deliver a much better product to us.”
“Neill has saved us tens of millions of dollars, not just in premiums, but also in helping contain costs despite very large claims,” another client said.
In 2013, Matthew Heinz placed a policy limit in excess of $300 million — a record in the private equity space — for a seller in a transaction valued at more than $2 billion.
The seller was required to have an insurance policy that would backstop their indemnification obligations in order to sign the acquisition agreement.
Despite the difficult terms and large limit required, Heinz got the coverage bound for the client on a very compressed timeline — including the bulk of Memorial Day weekend — and within budget. He was informed by both the client and the investment bankers on the deal that had the insurance not been placed, the deal would not have closed.
“Heinz is an extremely competent and knowledgeable broker in the reps and warranties field,” said Ira Weisman, managing director at Cerberus Operations and Advisory Co. “He has done a number of deals for us and is very reliable.”
“We needed to get a reps and warranty policy in place in about a week’s time to close a deal, and they just absolutely crushed it — jamming ’round the clock,” said Michael LaSalle, a partner at Shamrock Capital Advisors. “They got the buyer comfortable with it and we were able to close.”
“Matt helped us out with a difficult situation with a client, and helped spearhead the efforts and put pressure on some of the carriers to eventually get the covers we needed for a transaction,” a client said. “He was a good advocate for us.”
Broker Innovation Helps Seal the Deal
An investment bank prospect was advising a seller in a deal, in which the buyer required a representations and warranties policy that was considered too onerous by the seller. Not only was the seller under a very tight time frame to execute the transaction, but the amount of limits required by the buyer were exceedingly high. This combination of time frame and limit size made the transaction complex and difficult.
Through teamwork and strength in the marketplace, Michael O’Brien provided the seller a representations and warranties policy to backstop the deal, allowing it to go through. It was the largest reps and warranties deal in Aon’s history and resulted in the investment bank formally introducing the concept to more of its clients.
“Michael has really done an excellent job solving problems for us,” said Kent Swanson, chief financial officer at Newcastle Ltd. “We’ve been working on an area new to us, but not new to Michael — a $100 million construction project. He was able to assist us with an owner-controlled construction insurance policy, a builders’ risk policy as well as a subguard policy and a bonding program to ensure against bankruptcy and performance of the contractors. It was a pretty complex structure of insurance, and Michael and his team handled that very efficiently.”
“Michael O’Brien is excellent,” another client said. “He really assembled a good team for us, and he comes up with creative solutions. We have some pretty complex stuff here and he’s always been extremely helpful in guiding solutions that not only are cost-effective, but make sense for our risk profile.”
Top Negotiator Powers Through Roadblock
Last April, Jeffrey Rubocki helped resolve an impasse between a buyer and a seller regarding the indemnification provision for the representations and warranties in an acquisition agreement. The seller was private equity-backed with financial difficulties, and the buyer was not convinced that the seller and/or its owner would be able to indemnify it if a future breach of a representation or warranty occurred. As such, the buyer demanded higher-than-normal escrow, but the seller could not afford it.
Rubocki, who moved from Equity Risk Partners to Krauter & Co. in November, went to the transactional market and put in place a sell-side representations and warranties policy that would cover any breach of a seller representation and warranty in the acquisition agreement. After much negotiation, the buyer was willing to accept the policy in lieu of a large escrow and thus was comfortable with moving forward on the deal. It was because of the manuscript insurance policy that Rubocki was able to put in place on behalf of the seller that the deal was able to eventually close.
“I think that he is one of the most incredibly diligent brokers,” said Jay B. Spievack, a partner at Cohen Tauber Spievack & Wagner. “He knows how to represent the interests of his clients to maximize their chance to get insurance coverage, or when there is a large claim that could affect the company’s business. I think he gives total devotion to his clients.”
“Jeff Rubocki goes way beyond the call of duty,” another client said. “He has helped me out on several occasions without an expectation of anything in return.”