Meadowbrook Insurance Group Announces Private Offering of Unsecured Cash Convertible Senior Notes

Meadowbrook Insurance Group

, announced that it plans to make a private offering of $75 million aggregate principal amount of its Cash Convertible Senior Notes due 2020 (the "notes"). Meadowbrook also plans to grant the initial purchasers of the notes an option to purchase up to an additional $11.25 million aggregate principal amount of the notes. The notes will be offered only to qualified institutional buyers (as defined in the Securities Act of 1933, as amended (the "Securities Act") pursuant to Rule 144A under the Securities Act. The notes are unsecured, and Meadowbrook expects to pay interest on the notes semiannually. The notes will be convertible at the option of the holders into solely cash in certain circumstances and during certain periods. The notes will not be convertible into Meadowbrook common stock or any other securities under any circumstances. Meadowbrook will not have the right to redeem the notes prior to maturity. The notes are expected to mature on March 15, 2020, unless earlier repurchased or converted into cash in accordance with their terms prior to such date. The interest rate, conversion rate and certain other terms of the notes will be determined by negotiations between Meadowbrook and the initial purchasers. In connection with the pricing of the notes, the Company intends to enter into privately negotiated cash convertible note hedge transactions with one or more of the initial purchasers of the notes or their respective affiliates or other financial institutions (the "option counterparties"). The cash convertible note hedge transactions are expected to reduce the Company's exposure to potential cash payments due upon conversion of the notes in excess of the principal amount thereof. The Company also intends to enter into privately negotiated warrant transactions with the option counterparties, which could have a dilutive effect to the extent that the price of the Company's common stock exceeds the applicable strike price of the warrants. If the initial purchasers exercise their option to purchase additional notes, the Company may increase the size of the cash convertible note hedge transactions and enter into additional warrant transactions. In connection with establishing their initial hedge of the cash convertible note hedge and warrant transactions, the option counterparties or their affiliates expect to enter into various derivative transactions with respect to the Company's common stock concurrently with or shortly after the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company's common stock or the notes at that time. In addition, the option counterparties or their affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to the Company's common stock and/or purchasing or selling the Company's common stock or other securities of the Company in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period related to a conversion of the notes). This activity could also cause or avoid an increase or a decrease in the market price of the Company's common stock or the notes. Meadowbrook expects to use the net proceeds from the offering to pay the cost of the cash convertible note hedge transactions (after such cost is partially offset by the proceeds to Meadowbrook from the warrant transactions). Meadowbrook intends to use substantially all of the remainder of the net proceeds from the offering in order to make capital contributions to its insurance company subsidiaries in order to support such subsidiaries' operations and financial strength, with the balance of any proceeds to be used to repay its outstanding indebtedness. The notes will not be registered under the Securities Act. The notes may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. This press release is not an offer to sell, or a solicitation of an offer to purchase, any securities of the Company. It is issued pursuant to Rule 135c under the Securities Act.