Old Republic International Corp.'s liquidity is "moderately tighter than previously expected," warned Fitch Ratings. This places greater uncertainty on ORI's ability to fund a potential debt acceleration.
Such an event will occur if any one of its "significant subsidiaries" goes into bankruptcy or becomes insolvent. The company's private mortgage insurance unit, Republic Mortgage Insurance Co. has been operating in run-off since the end of August and is now under an order of supervision restricting claims payments to 50% from its regulator. ORI states that the order does not trigger the debt acceleration covenant.
Fitch said ORI has $500 million of liquidity at the parent company level; it had previously estimated the level there was $730 million.
Total outstanding debt at ORI is $866 million, plus annual interest of $31 million. If the full amount is accelerated, Fitch said there could be a shortfall in the area of $400 million.
ORI does have enough liquidity on hand to repay a $316 million senior note due on May 12, but does not have enough to fully fund its shareholder dividend, which the rating agency estimates will cost $178 million.
Fitch said ORI is exploring options, including a covenant amendment which removes RMIC from the definition of a "significant subsidiary."
ORI still is active in the title and general insurance businesses.
