4 Min Read
NEW YORK (Reuters) - Steve A. Cohen's SAC Capital Advisors is in discussions to sell its reinsurance business as the $14 billion hedge fund deals with the fallout of a long-running insider trading probe, four people familiar with the discussions said on Thursday.
Multiple parties have expressed interest in the reinsurance company, according to one person familiar with the company. However, the company's board is considering various options, which could include, but is not limited to, a wind-down of the business, that person said.
The four sources familiar with SAC Re's potential sale wanted to remain anonymous because they are either not permitted to speak to the media or because the talks are private.
Selling the Bermuda-based reinsurer, launched only last year, would help Cohen continue on the path of converting his hedge fund into a family office after the government filed criminal insider trading charges against the SAC in July.
The insurance arm, with roughly $500 million in assets, is a source of outside capital that needs to be returned or dealt with in some way to make such a transition possible, people familiar with the matter said. Virtually all outside investors have pulled their capital from Cohen's fund since the charges.
SAC has denied the charges. A spokesman for SAC had no comment on the reinsurance matter on Thursday.
About 25 percent of the reinsurer's assets are funded by Cohen, according to one of the sources. SAC Re's assets also include founding capital from Capital Z Partners, a private equity firm.
Speculation that SAC would have to sever ties to the reinsurance unit has been mounting since late July, especially after insurance rating group A.M. Best placed SAC Re on review with negative implications after the charges were filed.
U.S. federal prosecutors indicted the billionaire' s firm, saying SAC fostered a culture where employees flouted the law and were encouraged to tap their personal networks of contacts for inside information about publicly traded companies.
"Rating downgrades could occur if SAC Re cannot separate itself from reputational risk, the business plan is not executed over the long term or key management is not retained," A.M. Best said in July.
News of SAC seeking a buyer for the insurance arm was first reported by the Wall Street Journal, which said that a number of investors have been informally approached about a sale, including Pine River Capital Management.
A spokesman for Pine River declined to comment.
Reinsurance has been a popular way for some hedge fund managers, including Daniel Loeb, David Einhorn and John Paulson, to raise capital and talk has mounted in the last months that more hedge funds are looking to get into business.
With investors pulling most of the $5 billion in outside money managed by SAC Capital in recent months, Cohen will not need as large an operation and is looking at becoming a family office sometime this year or next.
SAC Re had $567.8 million in assets at the end of 2012.
Reporting By Katya Wachtel; Editing by Kenneth Barry