HCI Group targets increased operational and capital flexibility

Florida-domiciled insurtech, HCI Group, Inc., along with its majority-owned subsidiary, TypTap Insurance Group, Inc., will be modifying its relationship with Centerbridge Partners L.P. as it eyes greater operational and capital flexibility to better position the company for future growth opportunities.

One of the strategic steps taken by the company includes the extension of the warrant held by Centerbridge and redeeming all outstanding preferred shares of TypTap Insurance Group held by Centerbridge.

Specifically, Centerbridge and HCI have agreed to extend the expiration date of the warrant currently held by Centerbridge to purchase up to 750,000 shares of HCI common stock. The announcement explains that this agreement extends the expiration as to 450,000 underlying warrant shares in 150,000-share increments during the period December 31, 2026 through December 31, 2028, and the expiration of the remaining 300,000 underlying warrant shares will remain the same as the originally scheduled expiration date of February 26, 2025.

HCI notes that it will recognize a one-time non-cash deemed dividend related to the warrant extension in Q1 2024. The two companies have entered into a registration rights agreement to grant resale registration rights to Centerbridge concerning Centerbridge’s warrant and the shares of HCI common stock issuable pursuant to the warrant.

Paresh Patel, Chairman & Chief Executive Officer, HCI, commented, “We are taking steps to simplify our balance sheet and give us maximum flexibility to pursue attractive opportunities in the future. We believe this modification could lead to an immediate benefit to HCI’s financial results by eliminating future dividends that would have otherwise accrued on the preferred shares, but more importantly, gives the company added autonomy and flexibility to pursue future growth opportunities that could unlock additional shareholder value in the future.”

TypTap has also redeemed all of the TypTap Series A Preferred Stock held by Centerbridge, more than one year before Centerbridge’s optional February 26, 2025 redemption date. The redemption totalled approximately $100 million plus accrued and unpaid dividends of approximately $2.9 million.

The redemption results in the elimination of any future dividends that would have otherwise accrued on the preferred shares, including dividends at the increased dividend rate of 9.5% that would have commenced in February 2024. The redemption is being funded with cash on hand, as well as approximately $50 million from HCI’s existing credit facility with Fifth Third Bank.

HCI has concurrently filed a shelf registration statement on Form S-3. The Shelf Registration, which automatically became effective immediately on filing, replaces the company’s old universal shelf registration statement filed in September 2023. It will also enable Centerbridge to sell all or a portion of the above-described amended and restated warrant or the shares issuable pursuant to the warrant.

As a part of the Shelf Registration, HCI has also implemented an “at-the-market” facility under which it would have the ability to raise $75 million through the issuance of new shares of common stock into the market if it were to so choose.

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