Credit Crunch
29/03/2009 Towergate calls in KPMG dated 29th March 2009
Towergate Partnership, which describes itself as Europe's largest independently owned insurance group, is believed to have drafted in restructuring experts from accountancy firm KPMG to tackle its debt mountain, months after it agreed a covenant waiver with its banks.
It is thought that KPMG, which also audits the company, has been brought in to look at the insurer to restructure its borrowings and other parts of the business ahead of future covenant tests at the end of the year.
In November, Towergate's chief executive, Andy Homer, said the company had agreed new debt covenants with Lloyds Banking Group which will be tested at the end of this year.
He said Towergate would also be seeking fresh investment from private equity in 2009.
The American hedge funds Och-Ziff and Reservoir Capital own stakes in the company, collectively worth more than £200m. Talks to sell a 25 per cent stake in Towergate to the now-failing private equity firm Candover collapsed last year.
At the height of the bull market, Towergate was estimated to have carried a price tag of around £3bn.
The group has pursued an aggressive acquisition strategy over the past few years, buying 16 firms in 2007 alone. Its accounts, released in November, show that it carried loans and facilities worth nearly £600m. The interest payments on this debt were more than £37m in 2007 – roughly equal to the company's operating profits during that year. The accounts also show that one of the group's loans carries a charge of 9.75 per cent above the Libor rate, which has rocketed since the credit crunch began.
Formed in 1997, Towergate now employs more than 4,000 staff across 100 offices. Peter Cullum, the executive chairman of Towergate, who was ranked 40th in last year's Sunday Times Rich List with an estimated fortune of £1.7bn, tried to buy the struggling Championship football team Norwich City last year, although the deal eventually fell through.
A spokesman for Towergate declined to comment.
