The Scoop
777, the investment firm and sports buyer now fending off angry creditors, has sold one of its US insurance businesses to hedge fund Knighthead Capital, people familiar with the transaction said, raising some cash that could buy 777 time to restructure its business.
The company previously announced the sale of the business, Merit Life, which offers retirement policies in the US, to an unnamed buyer in September after a process that drew bidders including Josh Harris’ 26North and hedge fund Hildene Capital, the people said.
That deal fell through as 777’s problems mounted, including an investigation by the Justice Department and a slew of creditor lawsuits. Knighthead, best known recently for engineering Hertz’s emergence from bankruptcy and its subsequent, disastrous bet on electric vehicles, has agreed to pay about $25 million.
Knighthead and 777 did not respond to requests for comment. 26North and Hildene declined to comment.
Step Back
There are two kinds of money managers these days: those with an insurance arm, and those that want one. Investment firms have been racing to replicate Apollo’s money-spinning annuities business, which sells retirement and life insurance policies that will pay out decades from now and invests the cash into its own deals. KKR, Carlyle, Brookfield, Blackstone, Ares, Sixth Street, Blue Owl, and Golden Gate all own, or partly own, life insurers.
BlackRock is currently looking for a minority stake in one, people familiar with the matter said. As of last summer, US private equity firms owned 137 insurers and controlled one in every $15 paid by policyholders, according to the industry’s own tally.
The result has been a drastic shift on Wall Street, with a shadow financial system of insurance premiums funding corporate buyouts and credit card portfolios. 777 pushed that model beyond its factory settings, putting policyholders’ money into European sports teams, payday lending, and other risky ventures, and its financial distress — it hired bankruptcy advisers earlier this month — has focused attention from rivals and regulators on the private-equity industry’s insurance gold rush.
