In other words, Trenwick America went from being the key entity in one business
line comprised of domestic reinsurance operations for both Trenwick and Chartwell to
being the parent of all the U.S. corporations in that line. The ownership of these entities
is not really what the complaint challenges, it is the increase in Trenwick America’s debt
that resulted from the reorganization. I describe that next.
Concurrently with the merger of Trenwick and LaSalle, a new credit facility was
entered for $490 million, a figure $90 million higher than the previous figure. Of the
$490 million, $230 million was for a letter of credit dedicated to the Lloyd’s syndicates
managed by Chartwell Managing Agents. Before the restructuring and LaSalle merger,
Trenwick America had been on the hook for this portion of the credit facility in the event
parent Trenwick defaulted. After the LaSalle merger, the primary obligor on the $230
million letter of credit became Trenwick Holdings Limited, that is, the top U.K.
subsidiary, which was on top of all the Trenwick subsidiaries conducting business out of
the U.K. Trenwick America remained a guarantor, however, of that letter of credit. The
remaining $260 million of the credit facility was for a revolver. After the LaSalle
merger, Trenwick America went from being the secondary obligor to becoming the
primary obligor for that part of the facility. According to the Litigation Trust, the
revolver had no benefit for Trenwick America but simply was necessary for Trenwick’s
other operations. Thus, Trenwick America’s liability exposure under the credit facility
increased after the restructuring and LaSalle merger. That exposure was in addition to
the obligation to service $190 million in Assumed Notes by Trenwick America that
previously was owed by parent Trenwick.