Best Lowers Scottish Re Ratings

A.M. Best Co. has downgraded the financial strength rating (FSR) to “B” (Fair) from “B+” (Very Good) and the issuer credit ratings (ICR) to “bb+” from “bbb-” of the primary operating insurance subsidiaries of the Cayman Island-based Scottish Re Group Limited. Best also downgraded the ICR of Scottish Re to “b” from “bb-” and all of Scottish Re’s debt ratings. The ratings remain under review with negative implications.

“These rating actions reflect A.M. Best’s review of Scottish Re’s short-term liquidity and collateral needs following the release of its third quarter financial statements,” said the announcement. Best also noted that, “as indicated in its recent Securities and Exchange Commission (SEC) filings, Scottish Re’s liquidity and collateral position remains very tight over the near term and tenuous into 2007. Note holders have the right to require Scottish Re to repurchase $115 million of the 4.5 percent senior convertible notes on December 6, 2006, and this source of liquidity has not yet been finalized.”

Best indicated, however, that it “acknowledges management’s efforts at seeking strategic alternatives and capital and liquidity sources since the last rating action on August 22, 2006 (see related press release). However, the timing and execution of any capital raising initiatives to alleviate these near and longer term liquidity concerns remains uncertain. As a result, the maintenance of a “Secure” FSR is no longer appropriate. Should a transaction be announced, A.M. Best would determine if a change in the under review status is appropriate.”