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stock as BBB-. On December 20, 1999, Moody’s Investors Service confirmed its

previously issued Baa2 rating for Trenwick’s senior debt and revised its rating outlook to


As was also the case in the merger with Chartwell, both of the merger partners

received fairness opinions. LaSalle’s investment banker estimated the resulting Trenwick

entity’s value under a discounted cash flow analysis at $17.04 to $23.17 per share without

synergies and $19.14 to $25.73 per share with operating synergies from the merger.19

This is not to say that the financial statements and information were devoid of less

rosey information. They were not. In particular, they plainly revealed that Trenwick

operations had suffered operating losses in 199920 and Trenwick America operations

(including the Chartwell U.S. reinsurance business as of their acquisition) had suffered

operating losses in 1999 and 2000.21

5. The Restructuring Of Trenwick Subsidiaries

Beginning April 1, 2000, Trenwick began a reorganization of its subsidiaries that

was completed on September 27, 2000. During the first stage of the restructuring of

Trenwick’s subsidiaries, Chartwell’s reinsurance businesses, including all its active U.S.

and U.K. reinsurance subsidiaries were transferred to Trenwick America as indirect

subsidiaries. That transfer left Chartwell Re, originally the parent entity of all the

Chartwell businesses and the direct subsidiary of Trenwick, holding as its only asset one

18 19 20 21

at 91-92. at 47. Hefter Decl. Ex. A. at 48, 53 (Trenwick 10-K filed Aug. 22, 2000). Stone Aff. Ex. 7 at 5 (Trenwick America Form 10-K filed Apr. 2, 2000).


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