A.M. Best Places Rating of Real State Insurance Corporation Under Review
November 21 2006 - 3:35PM
Business Wire
A.M. Best Co. has placed the financial strength rating (FSR) of A-
(Excellent) of Real State Insurance Corporation (Honolulu, HI)
under review with negative implications. This rating action follows
the announcement of the leveraged buyout (LBO) of Real State�s
ultimate parent, Equity Office Properties Trust (Equity Office)
[NYSE: EOP], by The Blackstone Group (Blackstone). The deal
contemplates Blackstone paying $48.50 per share for Equity Office
stock for a total deal value of $36 billion. The payment represents
a $20 billion purchase price with the assumption of $16 billion of
debt. This LBO qualifies as the largest in U.S. history and the
world�s largest private equity deal. The placing of Real State�s
rating under review is due to the potential that the financial
leverage of the new entity may be excessive and that the captive�s
future business activities are unknown at this time. Real State�s
rating will be updated when more definitive information regarding
the captive�s role, the credit rating of Equity Office, or a
successor organization is solidified. Real State provides various
property/casualty coverages to Equity Office. The pure captive does
not write any third party risks; therefore, the rating of Real
State is heavily influenced by the financial strength of Equity
Office. Additionally, Real State currently has a relatively large
loan-back of equity to its parent organization. The details of how
this will be handled by the new organization is important to A.M.
Best since it will impact any future rating decisions A.M. Best
makes regarding Real State. For Best�s Ratings, an overview of the
rating process and rating methodologies, please visit
www.ambest.com/ratings. For current Best�s Ratings and independent
data on the captive and alternative insurance market, please visit
www.ambest.com/captive. A.M. Best Co., established in 1899, is the
world�s oldest and most authoritative insurance rating and
information source. For more information, visit A.M. Best�s Web
site at www.ambest.com. A.M. Best Co. has placed the financial
strength rating (FSR) of A- (Excellent) of Real State Insurance
Corporation (Honolulu, HI) under review with negative implications.
This rating action follows the announcement of the leveraged buyout
(LBO) of Real State's ultimate parent, Equity Office Properties
Trust (Equity Office) (NYSE: EOP), by The Blackstone Group
(Blackstone). The deal contemplates Blackstone paying $48.50 per
share for Equity Office stock for a total deal value of $36
billion. The payment represents a $20 billion purchase price with
the assumption of $16 billion of debt. This LBO qualifies as the
largest in U.S. history and the world's largest private equity
deal. The placing of Real State's rating under review is due to the
potential that the financial leverage of the new entity may be
excessive and that the captive's future business activities are
unknown at this time. Real State's rating will be updated when more
definitive information regarding the captive's role, the credit
rating of Equity Office, or a successor organization is solidified.
Real State provides various property/casualty coverages to Equity
Office. The pure captive does not write any third party risks;
therefore, the rating of Real State is heavily influenced by the
financial strength of Equity Office. Additionally, Real State
currently has a relatively large loan-back of equity to its parent
organization. The details of how this will be handled by the new
organization is important to A.M. Best since it will impact any
future rating decisions A.M. Best makes regarding Real State. For
Best's Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings. For current
Best's Ratings and independent data on the captive and alternative
insurance market, please visit www.ambest.com/captive. A.M. Best
Co., established in 1899, is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit A.M. Best's Web site at www.ambest.com.
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