China's Fosun appoints Deutsche Bank to sell reinsurance firm Peak Re

China's Fosun appoints Deutsche Bank to sell reinsurance firm Peak Re

A company logo of Fosun International is seen at the Fosun Fair held alongside the annual general meeting of the Chinese conglomerate in Hong Kong, China May 28, 2015. REUTERS/Bobby Yip

China’s Fosun International Ltd has appointed Deutsche Bank to advise on a potential sale of its stake in Hong Kong-based reinsurance company Peak Re, four people with knowledge of the matter told Reuters.

The sale comes as the tourism-to-financials conglomerate is battling with high debts. Ratings agency Moody’s downgraded the company’s credit rating to B2 last month and revised its outlook to “negative” from “ratings under review”

The Peak Re sale plan is at an early stage and a formal process has yet to kick off, said two of the sources. More financial details of the asset are expected to be sent to potential buyers by year-end, one of them added.

The sources declined to be named as they were not authorised to speak to the media.

Fosun and Peak Re did not immediately respond to requests for comment. Deutsche Bank declined to comment.

The Chinese conglomerate owns 86.9% of Peak Re, and it is not immediately clear what valuation a sale would ascribe to the reinsurance firm. Peak Re said in its 2021 annual report its total equity was $1.47 billion at the end of 2021.

Founded in 2012, Peak Re received inaugural investments in 2013 from Fosun and International Finance Corp (IFC). Fosun invested $468 million for a 85.1% stake and IFC $81.95 million for the rest to give the company an initial valuation of $550 million.

In 2016, Fosun invested an additional $100 million in Peak Re. In 2018, Prudential Financial Inc bought a 13.1% in the reinsurer while IFC exited, leaving Fosun with a 86.9% stake. Financial details of both transactions were not disclosed.

Peak Re reported a net profit of $73.2 million for 2021, down 16% from 2020, with gross written premiums totalling $2.15 billion, up 9% year-on-year, the annual report said.

Fosun, controlled by billionaire entrepreneur Guo Guangchang, was once one of China’s most aggressive dealmakers overseas, buying high-profile assets including resort brand Club Med.

It has been selling assets in recent months to replenish liquidity. According to Refinitiv data, Fosun has agreed to sell or sold over $5 billion in assets so far this year.

Moody’s said in its ratings report the company’s cash on hand at the holding company level would be insufficient to cover its short-term debt maturing over the next 12 months.

Fosun said in October it had terminated its business engagement with Moody’s rating service and ceased to provide relevant information to the agency from Oct. 12.

Reuters

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