Business Context and Reporting Period
Company: GREENLIGHT CAPITAL RE, LTD.
Filing Type: Form 8-K (Current Report)
Date of Report: September 1, 2018
Event: Entry into a Material Definitive Agreement and Termination of a Material Definitive Agreement.
On September 1, 2018, Greenlight Capital Re, Ltd. ("Greenlight Capital Re") entered into an Amended and Restated Exempted Limited Partnership Agreement to form Solasglas Investments, LP (the "Partnership"). This new structure replaces the previous Joint Venture Agreement ("JV Agreement") dated January 1, 2017. Assets previously invested under the JV Agreement are being transferred to the Partnership. DME Advisors II, LLC serves as the General Partner with exclusive investment management authority.
Key Financial Metrics and Terms
This filing details contractual terms and investment guidelines rather than historical financial performance metrics such as revenue or net income. Key financial parameters established include:
- Management Fee: 0.125% per month (1.5% annualized) of each limited partner's Investment Portfolio.
- Performance Allocation: 10% of positive performance up to the Carryforward Account balance, and 20% of positive performance exceeding that balance.
- Liquidity Rights: Partners may withdraw capital on any business day or for cause with three business days' notice.
- Investment Composition: At least 80% of assets must be held in debt/equity securities of OECD high-income countries, cash, cash equivalents, or gold. Private equity is capped at 10%.
Material Changes Versus Prior Period
The primary material change is the structural reorganization of the investment vehicle:
- Termination of JV Agreement: The previous joint venture structure is terminated, with assets assigned to the new Partnership.
- Continuity of Terms: Provisions regarding fees, investment guidelines, liquidity, and redemption rights are substantially the same under the new Limited Partnership Agreement as they were under the prior JV Agreement.
- Investment Guidelines Refinement: While broadly similar, specific concentration limits differ between the two entities (Greenlight Re vs. GRIL) within the new structure. For example, GRIL has a stricter single investment concentration limit (10%) compared to Greenlight Re (20%).
Guidance, Outlook, and Investment Guidelines
The filing outlines strict investment guidelines and risk management parameters for the Partnership's assets:
- Greenlight Re Leverage: Maximum 15% indebtedness for extended periods; up to 30% for periods under 30 days. Currency hedging may be excluded from leverage calculations up to 10% of indebtedness.
- GRIL Leverage: Maximum 5% indebtedness for extended periods; up to 20% net margin leverage for periods under 30 days.
- Prohibitions: GRIL is prohibited from selling credit default swaps.
- Concentration Limits:
- Greenlight Re: No single investment >20% of portfolio.
- GRIL: No single investment >10%; top 10 investments <50%; minimum of 50 securities required.
- Term: The Investment Advisory Agreement has an initial term ending August 31, 2023, with automatic three-year extensions unless terminated with 90 days' notice.
Important Facts for Investor Verification
- Verify the successful transfer of assets from the terminated JV Agreement to the new Solasglas Investments, LP.
- Confirm the specific allocation of assets between Greenlight Re and GRIL to understand which leverage and concentration guidelines apply to specific holdings.
- Monitor the calculation of the performance allocation, specifically the "Carryforward Account" balance which determines the 10% vs. 20% fee tier.
- Review the "Termination Agreement" (Exhibit 10.4) to confirm the exact date the JV Agreement ceases to be effective (earlier of Jan 2, 2019, or asset transfer completion).