LASALLE RE HOLDINGS LTD - 10-Q Quarterly Report - 03/31/2003
The Series B Shares are convertible into common shares of Trenwick after five
years or upon the occurrence of certain "special conversion events" or the
failure of Trenwick to maintain certain levels of capital. On February 20, 2003,
Trenwick delivered a notice to European Re that Trenwick's GAAP Net Worth (as
defined in the Certificate of Designation, Preferences and Rights (the
"Certificate of Designation") of the Series B Shares) had fallen below $225
million. Trenwick's GAAP Net Worth did not equal or exceed $225 million during
the period from February 20, 2003 through April 21, 2003 (which is 60 days after
the date of notice). As a result, a Net Worth Conversion Event (as defined in
the Certificate of Designation) occurred on April 21, 2003, and the Series B
Shares are now convertible at the option of European Re into Trenwick common
shares upon no less than 60 trading days advance notice to Trenwick. European Re
has not delivered to Trenwick such a notice of conversion. As of December 31,
2002, the Series B Shares would be settled upon conversion with approximately
12.2 million common shares, or 33% of Trenwick's common shares, based on the
year end figures for 2002. Trenwick has recently been notified by European Re
that European Re believes Trenwick's calculation of the number of common shares
to be received upon conversion of the Series B Preferred Shares is erroneous and
that under European Re's interpretation of the documentation the Series B
Preferred Shares would have been entitled to convert into approximately 48.1
million shares, or 56.6% of the common shares, based on the year end figures for
2002. Trenwick believes its calculation is correct but intends to discuss this
issue with European Re. If European Re converts its Series B Preferred Shares,
there would be substantial dilution to the holders of the common shares, and
this conversion could result in European Re obtaining control of Trenwick, and
therefore the Company, subject to compliance with applicable insurance law and
regulation.
AI
