The bankruptcy and reorganization plan filed by insurance technology and outsourcing firm Patriot National has been approved and the transition of ownership of the Florida-based company can now move forward.
According to a statement from Patriot National, the bankruptcy court on May 4 approved the company’s plan of reorganization, which will result in the transition of ownership from its public shareholders to Cerberus Business Finance, LLC and its affiliates and TCW Asset Management Company LLC.
The chapter 11 filing for bankruptcy was made Jan. 30 in the U.S. Bankruptcy Court for the District of Delaware by the company and its direct and indirect U.S.-based subsidiaries.
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According to the bankruptcy plan:
- Employees will continue to receive all wages in the ordinary course of business
- Broker commissions will be paid in the ordinary course of business
- Carrier customers can be assured of uninterrupted service and payments in accordance with the terms of their current agreements
- Vendors will continue to be paid going forward pursuant to existing terms
“The plan provides our company with a significantly healthier capital structure that will enable us to be agile and competitive in the current market. Cerberus and TCW are fully invested in the future of our business, and we look forward to working together to emerge from this process as a stronger company,” said John Rearer, CEO of Patriot National, which is headquartered in Fort Lauderdale.
Patriot National’s financial woes came to a head in mid-November with the announcement that its largest workers’ compensation customer, Guaranteed Insurance Co. (GIC), would be placed in receivership by Florida regulators. The companies were mutually owned by founder, majority stockholder and former CEO Steven Mariano, who resigned from Patriot National last summer.
GIC held an estimated 10 percent of Patriot National’s stock and accounted for 60 to 70 percent of its business.
GIC provided alternative market workers’ compensation insurance in 31 states, with 8,600 active policies in force as of Nov. 13, including 1,250 in Florida. Under the liquidation order of Florida regulators, all GIC policies were cancelled effective Dec. 27.
Shortly after Florida regulators took over GIC, Patriot National filed a forbearance agreement with the Securities and Exchange Commission that said it would be laying off 250 employees, representing approximately one-third of its workforce.
The company announced a restructuring support agreement (RSA) later in November with its lenders, Cerberus Business Finance, LLC and its affiliates, and TCW Asset Management Co. LLC., which agreed to acquire the financially troubled firm.
The company’s recapitalization under the RSA and bankruptcy plan include a new lending facility. The plan will provide the capital structure needed to revitalize operations and funds to grow the business, Rearer said in February.
Patriot National said in its recent announcement it expects to emerge from chapter 11 in the second quarter of 2018.
After the company emerges from bankruptcy, Cerberus and TCW will convert a portion of their claims under the financing agreement in consideration for 100 percent of the new equity to be issued in Patriot National and the subsidiaries under the plan. All existing equity interests in Patriot National and its subsidiaries will be extinguished, and Patriot National will no longer have any affiliation with its founder and former CEO Mariano.
One of Patriot National’s subsidiaries, Patriot Underwriters Inc., is a national program administrator that underwrites and services workers’ compensation insurance for insurance companies.
Another affiliate of Patriot National, Ashmere Insurance Co., is to be acquired by New York-based Bedrock Insurance Group Holdings. Ashmere is a workers’ compensation insurance carrier licensed in 15 states.
Court filings and other information related to the restructuring are available at http://cases.primeclerk.com/patnat.
Hughes Hubbard & Reed LLP and Pachulski Stang Ziehl & Jones LLP are serving as legal bankruptcy counsel, and Duff & Phelps Corporation is serving as financial advisor.
- Patriot National Files for Chapter 11 Bankruptcy Protection
- Patriot National to Reorganize for Acquiring Lenders; Subsidiaries to File Chapter 11
- Bedrock Insurance to Acquire Ashmere Insurance, Unit of Struggling Patriot National
- Patriot National Exploring ‘Strategic Alternatives’
- Florida Puts Workers’ Comp Carrier Guarantee Insurance In Receivership