Harbinger Group Inc. -SEC Filings

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SEC Filings

10-Q

HRG GROUP, INC. filed this Form 10-Q on 05/05/2017

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March 31, 2017), cash flows from operations and $472.3 million available borrowings under the Revolver Facility. Spectrum Brands expects its capital expenditures for the fiscal year ending September 30, 2017 will be approximately $110.0 million to $120.0 million. Going forward, its ability to satisfy financial and other covenants in its senior credit agreements and senior unsecured indentures and to make scheduled payments or prepayments on its debt and other financial obligations will depend on its future financial and operating performance. There can be no assurances that its business will generate sufficient cash flows from operations or that future borrowings under Spectrum Brands’ debt agreements, including the Revolver Facility, will be available in an amount sufficient to satisfy its debt maturities or to fund its other liquidity needs.

Front Street

Front Street’s liquidity needs consist primarily of supporting the capitalization of its reinsurance business. As of March 31, 2017, Front Street maintained regulatory capital in excess of its minimum requirements. Front Street’s reinsurance obligations are collateralized by the assets in the funds withheld accounts of ceding companies. Front Street does not expect to need additional liquidity in the near-term, but there can be no assurance that its capitalization or the funds withheld assets will be sufficient in the future to meet applicable regulatory requirements or its reinsurance obligations in the event of impairments in the funds withheld assets.

Funds withheld receivables

Front Street Re (Cayman) Ltd. (“Front Street Cayman”), a wholly-owned subsidiary of Front Street, has entered into various reinsurance agreements on a funds withheld basis, meaning that funds are withheld by the ceding company, from the coinsurance premium owed to Front Street Cayman as collateral for Front Street Cayman’s payment obligations. Accordingly, the collateral assets remain under the ultimate ownership for the ceding company. Front Street Cayman’s investment portfolio underlying the funds withheld assets includes fixed maturities and short-term investments that are recorded at fair value and other invested assets. The carrying values of the investments underlying the funds withheld receivables at March 31, 2017 and September 30, 2016 were as follows (in millions):



	March 31, 2017				September 30, 2016
Asset Class	Fair Value		Percent		Fair Value		Percent
Corporates	$	1,048.4	68.0	%	$	1,033.3	67.3	%
Asset/Mortgage-backed securities	330.7		21.4	%	350.4		22.8	%
Government bonds	80.5		5.2	%	69.9		4.6	%
Municipals	68.3		4.4	%	66.4		4.3	%
Preferred stock	8.2		0.5	%	8.2		0.5	%
Agency bonds	7.3		0.5	%	6.9		0.5	%
Total fixed maturity securities included in funds withheld receivables	1,543.4		100.0	%	1,535.1		100.0	%
Accrued interest	17.0				17.8
Net cash receivables	52.2				77.7
Policy loans and other	21.6				19.8
Total funds withheld receivables	$	1,634.2			$	1,650.4

The decrease in fair value of the funds withheld receivables at March 31, 2017 compared to September 30, 2016 was primarily related to the increase in risk-free rates and widening credit spreads.

The table below summarizes Front Street’s funds withheld receivables rated by established nationally recognized statistical rating organizations in percentage terms at March 31, 2017 and September 30, 2016 (by credit rating, in millions):



	March 31, 2017				September 30, 2016
Rating	Fair Value		Percent		Fair Value		Percent
AAA	$	112.5	7.3	%	$	109.9	7.2	%
AA	193.0		12.5	%	205.9		13.4	%
A	298.3		19.3	%	263.7		17.2	%
BBB	497.8		32.3	%	502.1		32.7	%
BB	204.1		13.2	%	187.6		12.2	%
B and below	227.2		14.7	%	256.8		16.7	%
Not rated	10.5		0.7	%	9.1		0.6	%
Total	$	1,543.4	100.0	%	$	1,535.1	100.0	%

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