Athene Holding Ltd. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated June 30, 2023, details material definitive agreements entered into by Athene Holding Ltd. and its subsidiaries. The primary focus is the establishment of a new capital vehicle, ACRA 2, and the restructuring of the Company's revolving credit facilities with Citibank and Wells Fargo.
Key Financial Metrics and Agreements
- ACRA 2 Capital Vehicle: Athene Life Re Ltd. (ALRe) sold 50% of the non-voting economic interests in ACRA 2 to Apollo/Athene Dedicated Investment Program II (ADIP II) for approximately $640 million. As of March 31, 2023, $6.5 billion of reserve liabilities had been retroceded to ACRA 2.
- Citibank Credit Facility: A new unsecured revolving credit facility of up to $1.25 billion (expandable to $1.75 billion) was established. The facility matures on June 30, 2028, with options for two one-year extensions.
- Wells Fargo Credit Facility: A new unsecured 364-day revolving credit facility of up to $2.60 billion (expandable to $3.10 billion) was established to optimize liquidity and working capital. The facility matures on June 28, 2024.
- Financial Covenants:
- Citi Facility: Minimum Consolidated Net Worth of $14.79 billion; Consolidated Debt to Capitalization Ratio not to exceed 35%.
- Wells Facility: Minimum Consolidated Net Worth for ALRe of $8.77 billion.
Material Changes Versus Prior Period
Effective June 30, 2023, the Company terminated its previous credit agreements:
- The Citibank Credit Agreement dated December 3, 2019, was replaced by the new Citi Credit Facility.
- The Wells Fargo Credit Agreement dated July 1, 2022, was replaced by the new Wells Credit Agreement.
- The Company adopted the Fifteenth Amended and Restated Bye-laws effective July 1, 2023, to accommodate the ACRA 2 Framework Agreement.
Outlook, Management Commentary, and Risks
Strategic Intent: ACRA 2 was established as a long-duration, on-demand capital vehicle to support growth strategies and capital deployment. It has the right to participate in substantially all new inorganic transactions, pension group annuity transactions, and funding agreements for a commitment period of approximately three to five years.
Fees and Economics: ACRA 2 will pay ALRe a "Wrap Fee" of approximately 15 basis points per year on reserves of participating transactions. ALRe retains a commutation right to terminate ACRA 2's participation after 10 years based on book value pricing.
Risks and Contingencies:
- Covenant Compliance: Failure to meet minimum net worth or debt-to-capitalization ratios could trigger events of default, allowing lenders to terminate commitments and declare loans due.
- Capital Requirements: ACRA 2's participation in transactions is subject to capital requirements. If ACRA 2 fails to satisfy minimum aggregate capital requirements, ALRe has the right to recapture business.
- Tax Treaty Qualification: The economic ownership structure includes mechanisms to adjust interests to ensure ACRA 2 qualifies for benefits under the US-UK income tax treaty.
Investor Verification Checklist
- Verify the full text of the ACRA 2 Framework Agreement and Shareholders Agreement in the upcoming Form 10-Q for the quarter ending June 30, 2023.
- Confirm the current utilization levels of the new $1.25 billion Citi Facility and $2.60 billion Wells Facility.
- Monitor the Company's Consolidated Net Worth and Debt to Capitalization Ratio to ensure compliance with the new financial covenants.
- Review the specific terms regarding the "ACRA 2 Commutation Right" and the conditions under which ALRe can recapture business from ACRA 2.
- Assess the impact of the 15 basis point wrap fee on future profitability as ACRA 2 participates in new transactions.