MARCH 21, 2014 12:04 PM (EDT)

A.M. Best Comments on Virginia Surety Company, Inc. and Its Announced Transaction With TPG Capital


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FOR IMMEDIATE RELEASE

OLDWICK - MARCH 21, 2014 12:04 PM (EDT)
A.M. Best has commented that the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Virginia Surety Company, Inc., a subsidiary of TheWarranty Group, Inc. (TWG) (headquartered in Chicago, IL) are unchanged following TWG's recent announcement of its pending sale to TPG Capital(TPG) (Toronto, Canada). The outlook for both ratings is stable.

Under the terms of the transaction, Onex Corporation [TSX: OCX] has agreed to sell its ownership stake in TWG to TPG for a purchase price of $1.225 billion plus assumed debt for a total enterprise value of $1.475 billion. In conjunction with the transaction, TPG will refinance all existing debt and finance a portion of this transaction with debt, bringing TWG's pro forma financial leverage to approximately 40% post-closing. Holding company cash flows, liquidity, as well as interest coverage and fixed charge coverage ratios remain solid. The transaction is subject to customary regulatory approvals and is expected to close sometime in the third quarter of 2014.

Despite the pending change in ownership, the ratings for Virginia Surety remain unchanged and reflect its favorable earnings prospects, supportive capitalization and leadership position in the consumer extended warranty market. Virginia Surety's ability to generate solid operating results largely stems from its extensive database, broad administrative capabilities and ability to integrate its products and services across its broad client distribution channel. This transaction with TPG also removes some of the immediate ownership uncertainty that existed prior to this announcement, although not entirely, as the organization is still owned by private equity.

Virginia Surety and its affiliated companies are the largest underwriters of consumer extended warranties worldwide. Underwriting activities principally include coverage for extended warranty programs on automobiles, household appliances, consumer electronics, credit card enhancement programs and nonstructural home warranty.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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AMB# Company Name
055726 Onex Corporation
002314 Virginia Surety Company, Inc.