1025-00007 · Quorum Insurance Holdings · Shelving Analysis

letter-to-ridgeline-transaction-suspension.docx DOCUMENT M&A / Corporate

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CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law 601 Lexington Avenue New York, NY 10022 Telephone: (212) 848-4000 Facsimile: (212) 848-4099 www.calderwoodharkness.com

November 14, 2022

VIA EMAIL AND OVERNIGHT COURIER

Mr. Julian Weatherstone Head of ABS Origination Ridgeline Capital Markets LLC 383 Madison Avenue, 14th Floor New York, NY 10179

cc: Rebecca Tran, Managing Director, Insurance Finance ABS, Ridgeline Capital Markets LLC (via email)

Re: Suspension of Offering — Quorum Receivables Funding 2022-1 LLC — $500,000,000 Asset-Backed Notes (Insurance Premium Finance Receivables)

Ridgeline Deal ID: RCM-IPF-2022-0041 Calderwood & Harkness Matter No. 1025-00007

Dear Mr. Weatherstone:

I. Introduction and Purpose of Letter

Calderwood & Harkness LLP writes on behalf of its client, Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation (NYSE: QIHC), with its principal offices located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. We have been authorized by QIH to deliver this letter to Ridgeline Capital Markets LLC ("Ridgeline") in connection with the matters described below.

The purpose of this letter is to provide formal notification that QIH has determined to suspend the proposed $500,000,000 asset-backed securities offering (the "Offering") by Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"), a Delaware limited liability company and special-purpose bankruptcy-remote entity, effective immediately as of November 14, 2022. As described in greater detail in this letter, the suspension applies to the entirety of the contemplated capital structure, including the Rule 144A / Regulation S private placement of: (i) Class A Notes in the aggregate principal amount of $375,000,000, (ii) Class B Notes in the aggregate principal amount of $75,000,000, and (iii) Class C Notes in the aggregate principal amount of $35,000,000 (collectively, the "Notes"), each tranche of which was to be backed by a pool of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a wholly owned subsidiary of QIH.

This decision follows the QIH Board of Directors' determination, communicated to Calderwood & Harkness by QIH's General Counsel on this date, that the Offering should be suspended indefinitely in light of the market conditions and economic considerations set forth in Section II below. The QIH Board of Directors reached this determination by unanimous written consent on November 13, 2022, and authorized Calderwood & Harkness to transmit this notification to Ridgeline and other transaction parties without delay.

II. Background and Market Conditions Precipitating Suspension

As you are aware, the transaction was launched in June 2022 following QIH management's assessment that favorable market conditions presented an opportunity to securitize a portion of QPF's insurance premium finance receivables portfolio. Calderwood & Harkness was retained as issuer's counsel on June 28, 2022, pursuant to an engagement letter executed on that date. Ridgeline Capital Markets LLC was engaged as structuring agent, lead bookrunner, and sole placement agent for the Offering, pursuant to an engagement letter between QIH and Ridgeline dated July 6, 2022.

In furtherance of the transaction, the requisite special-purpose vehicles were organized. QRF 2022-1 and Quorum Receivables Holding LLC ("QRH"), each a Delaware limited liability company, were formed on August 3, 2022, with QRH serving as the intermediate transferee in the two-step true sale structure and QRF 2022-1 serving as the issuing entity.

Preliminary credit ratings were obtained from two nationally recognized rating agencies. Brindoval Ratings Inc. ("Brindoval") assigned preliminary ratings of AAA(cr) to the Class A Notes, A(cr) to the Class B Notes, and BBB(cr) to the Class C Notes, as reflected in its pre-sale report dated August 22, 2022. Pinnacle Rating Services LLC ("Pinnacle") assigned preliminary ratings of Aaa(p) to the Class A Notes, A1(p) to the Class B Notes, and Baa2(p) to the Class C Notes, as reflected in its new issuance report dated August 29, 2022. Both sets of preliminary ratings were predicated on the capital structure, credit enhancement levels, and pool characteristics described in the respective rating agency models and reports.

The core transaction documentation — including the Indenture, the Receivables Sale Agreement, the Receivables Transfer Agreement, the Servicing Agreement, the Note Purchase Agreement, and the ancillary documents described in Section IV below — was the subject of extensive negotiation among the parties and their respective counsel. This documentation reached near-final execution draft status, reflected in version 3 and version 4 drafts, on or about October 12, 2022. At that stage, all material commercial, structural, and legal points had been resolved or substantially resolved, and the documentation was in a condition suitable for final review in anticipation of pricing and closing.

A virtual investor roadshow commenced on October 24, 2022, during which QIH management, QPF's Chief Operating Officer, and representatives of Ridgeline presented the transaction to prospective qualified institutional buyers and institutional accredited investors. The roadshow consisted of a series of virtual meetings and group calls over the course of approximately two weeks and concluded on November 2, 2022.

However, market conditions deteriorated significantly between the time of deal launch and the conclusion of the roadshow period. At the time the transaction was launched in June 2022, comparable AAA-rated insurance premium finance asset-backed securities were trading in the secondary market at spreads of approximately SOFR + 95 to 110 basis points. Based on this market environment, the Class A coupon guidance for the Offering was established at SOFR + 125 basis points, providing a modest new issue concession to attract investor participation while remaining within QIH's targeted cost-of-funds parameters.

By early November 2022, comparable spreads in the insurance premium finance ABS sector had widened materially, reflecting broader credit market volatility, rising interest rates, reduced investor risk appetite, and diminished demand for structured finance products. Comparable AAA-rated insurance premium finance ABS paper was trading at spreads of approximately SOFR + 160 to 175 basis points — a spread widening of approximately 65 to 80 basis points from levels prevailing at the time of deal launch.

Following the conclusion of the virtual investor roadshow on November 2, 2022, Ridgeline transmitted indicative pricing to QIH reflecting investor feedback and current market conditions. The indicative pricing was as follows:

At these indicative pricing levels, the implied all-in weighted average cost of funds for the Offering equals approximately 200.25 basis points over SOFR, calculated as follows:

(75.0% × 168 bps) + (15.0% × 285 bps) + (7.0% × 450 bps) = 126.00 + 42.75 + 31.50 = 200.25 bps over SOFR

This figure does not include the remaining 3.0% of the capital structure represented by the unrated overcollateralization amount, which bears no coupon but represents an additional retained cost to QIH.

The implied all-in weighted average cost of funds of SOFR + 200.25 basis points exceeds QIH's Board-approved maximum all-in weighted average cost-of-funds hurdle of SOFR + 175 basis points by approximately 25.25 basis points. The Board-approved hurdle was established based on QIH's internal capital planning models, the expected yield on the underlying receivables portfolio, required servicing fee coverage, and minimum return-on-equity thresholds for QPF's securitization program. At the indicative pricing levels reflected in Ridgeline's November 2, 2022 communication, the economics of the transaction are unworkable at current market levels, and proceeding to pricing and closing would not be in the best interests of QIH or its shareholders.

Accordingly, the QIH Board of Directors has determined that it is prudent to suspend the Offering at this time rather than proceed at pricing levels that would result in an unacceptable cost of funds.

III. Formal Notification of Suspension

Based on the foregoing, QIH hereby instructs Ridgeline Capital Markets LLC to take the following actions immediately upon receipt of this letter:

(a) Cessation of Marketing Activities. Ridgeline shall immediately cease all investor marketing activities in connection with the QRF 2022-1 Notes offering. This instruction applies to all forms of investor outreach, whether conducted by Ridgeline's sales force, syndicate desk, capital markets professionals, or any other personnel of Ridgeline or its affiliates.

(b) No Further Solicitations or Distributions. Ridgeline shall make no further solicitations of interest, distribute no further marketing materials (including, without limitation, the Preliminary Offering Memorandum, the Investor Presentation Deck, or any supplemental data or analysis), and conduct no further investor calls, meetings, or other communications in connection with the Offering.

(c) Withdrawal of Indications of Interest. Ridgeline shall withdraw any outstanding indications of interest received from prospective investors and shall promptly inform all prospective investors who received marketing materials or participated in roadshow presentations that the Offering has been suspended indefinitely. Such communications with prospective investors should be limited to a factual statement that the Offering has been suspended and should not include any characterization of the reasons for the suspension, QIH's financial condition, the status of the receivables pool, or the likelihood or timing of any future reactivation, unless QIH has expressly approved the content of such communication in advance.

(d) No Pricing, Allocation, or Closing Activity. Ridgeline shall refrain from pricing, allocating, settling, or otherwise proceeding toward closing on any tranche of the Notes, whether Class A, Class B, or Class C, or any combination thereof.

For the avoidance of doubt, the action taken by QIH pursuant to this letter constitutes a suspension, not a termination, of the Offering. The transaction is being placed in dormant status pending improvement of market conditions and further assessment by QIH's management and Board of Directors. QIH expressly reserves the right to reactivate the Offering at a future date, subject to the terms and conditions described in Section VIII below. Nothing in this letter should be construed as a definitive abandonment of the transaction or a waiver of any rights that QIH, QRF 2022-1, or any other transaction party may have in connection therewith.

IV. Status of Transaction Documents

As noted above, the core transaction documentation reached near-final or execution draft status as of October 12, 2022, and remains in that condition as of the date hereof. For the record, and for the benefit of all parties in the event of a future reactivation, we set forth below the current status of the principal transaction documents:

A. Transaction Agreements:

(i) Indenture (execution draft v4, dated October 12, 2022), by and between QRF 2022-1, as issuer, and Calvoneth Trust Company, N.A., as indenture trustee, note registrar, paying agent, and custodian of the collection accounts;

(ii) Note Purchase Agreement (execution draft v3, dated October 12, 2022), among QRF 2022-1, QIH, and Ridgeline Capital Markets LLC, as initial purchaser;

(iii) Receivables Sale Agreement (execution draft v3, dated October 12, 2022), between QPF, as originator and seller, and QRH, as purchaser;

(iv) Receivables Transfer Agreement (execution draft v3, dated October 12, 2022), between QRH, as transferor, and QRF 2022-1, as transferee;

(v) Servicing Agreement (execution draft v3, dated October 12, 2022), among QRF 2022-1, QPF, as servicer, and Calvoneth Trust Company, N.A., as indenture trustee;

(vi) Back-Up Servicing Agreement (execution draft v2, dated October 12, 2022), among QRF 2022-1, QPF, Northvane Bank, N.A., as back-up servicer, and Calvoneth Trust Company, N.A., as indenture trustee;

(vii) Liquidity Facility Agreement (execution draft v2, dated October 12, 2022);

(viii) Administration Agreement (execution draft v2, dated October 12, 2022);

(ix) Account Control Agreement (execution draft v2, dated October 12, 2022);

(x) Custodian Agreement (draft);

(xi) Grant of Security Interest (execution draft v2, dated October 12, 2022); and

(xii) Performance Guaranty (execution draft v1, dated October 12, 2022).

B. Offering Documents:

(i) Preliminary Offering Memorandum (v3, dated October 12, 2022); and

(ii) Investor Presentation Deck (dated October 20, 2022).

C. Legal Opinions:

All draft legal opinions prepared in connection with the Offering, including the true sale opinions (QPF-to-QRH and QRH-to-QRF 2022-1), the enforceability opinion, the UCC perfection opinion, the tax characterization opinion (regarding REMIC/grantor trust/partnership/disregarded entity status), the no-registration opinion under the Securities Act of 1933, the Delaware formation and good standing opinions for QRF 2022-1 and QRH, and the non-consolidation opinions, remain in draft form only. None of these opinions were finalized or delivered to any party, and no reliance should be placed upon any draft opinions circulated during the course of the transaction.

D. UCC Filings:

UCC-1 financing statements were prepared in draft form covering the following filings: (a) QPF, as debtor, in favor of QRH, as secured party; (b) QRH, as debtor, in favor of QRF 2022-1, as secured party; and (c) QRF 2022-1, as debtor, in favor of Calvoneth Trust Company, N.A., as indenture trustee and secured party. None of these financing statements were filed with the Delaware Secretary of State or any other filing office, and no UCC liens are on record in connection with this transaction.

E. Closing Deliverables:

Closing certificates, officer's certificates, secretary's certificates, and related closing deliverables were drafted but never executed by any party. No bring-down good standing certificates were ordered.

Calderwood & Harkness will maintain the complete documentation file, including all drafts, work product, correspondence, and related materials, in its records in accordance with the firm's document retention policies. Calderwood & Harkness stands ready to update all documentation to reflect any changed circumstances — including updated pool data, revised economic terms, changes in applicable law or regulation, and refreshed representations and warranties — in the event QIH determines to reactivate the Offering at a future date.

V. Preliminary Ratings and Rating Agency Engagement

The preliminary credit ratings assigned by Brindoval Ratings Inc. (Engagement No. CR-SF-2022-08812) and Pinnacle Rating Services LLC (Engagement No. PRS-2022-ABS-3347) remain in preliminary status as of the date hereof. These preliminary ratings were issued subject to receipt of final documentation, satisfaction of closing conditions, and confirmation of final pool composition and deal economics. No final ratings have been assigned, and the preliminary ratings have not been affirmed, confirmed, or published in any final form.

QIH will separately communicate with the respective rating agency analysts — Andrew Petrosian at Brindoval and Monica Sung at Pinnacle — regarding the suspension of the Offering and the status of the preliminary ratings, including whether the preliminary ratings should be formally withdrawn or maintained in dormant status pending potential reactivation. Calderwood & Harkness will coordinate with QIH on the content and timing of those communications.

In the interim, Ridgeline should not make any representations to investors or third parties regarding the continued availability, validity, or applicability of the preliminary ratings. Any investor or counterparty inquiries regarding the preliminary ratings should be directed to QIH's General Counsel or to Calderwood & Harkness.

Additionally, the preliminary CUSIPs assigned to the Notes by CUSIP Global Services have not been finalized. The preliminary CUSIPs are as follows:

These preliminary CUSIPs should not be referenced in any further communications, marketing materials, or filings. Ridgeline should not request activation or finalization of these CUSIPs with CUSIP Global Services or The Depository Trust Company.

VI. Fees and Expenses

We note that the placement fees payable to Ridgeline under the Note Purchase Agreement were structured as follows and were in each case contingent upon the successful closing of the Offering:

Because the Offering has been suspended and closing will not occur, the placement fees set forth above are not payable and no obligation to pay such fees has arisen or will arise unless and until the Offering is reactivated and successfully closed.

QIH requests that Ridgeline provide a final accounting of any out-of-pocket expenses incurred by Ridgeline in connection with the transaction, including but not limited to roadshow production and logistics costs, travel expenses, printing and marketing material preparation costs, virtual data room hosting fees, Vireo Software and analytics costs, and any other documented out-of-pocket expenditures. QIH requests that such final accounting be provided within thirty (30) calendar days of the date of this letter.

For context, we note that total sunk costs incurred by QIH to date in connection with the transaction are approximately $2,555,000, broken down as follows:

• Accrued legal fees (Calderwood & Harkness LLP): approximately $1,950,000

• Rating agency fees (Brindoval Ratings Inc. and Pinnacle Rating Services LLC, combined): approximately $420,000

• Structuring, due diligence, and third-party advisory costs: approximately $185,000

These figures are provided for informational purposes and do not include any amounts that may be owed to Ridgeline for reimbursable out-of-pocket expenses. Any reimbursement obligations owed to Ridgeline under the terms of the existing engagement letter between QIH and Ridgeline dated July 6, 2022, will be addressed separately by QIH's Treasurer, Sandra Ling-Hwang, following receipt of Ridgeline's final accounting. QIH reserves the right to review and, as appropriate, dispute any claimed expenses that are not adequately documented or that fall outside the scope of reimbursable expenses as defined in the engagement letter.

VII. Confidentiality

We take this opportunity to remind Ridgeline of its confidentiality obligations with respect to the transaction, QIH's financial information, the receivables pool data, and all non-public information received by Ridgeline and its personnel in connection with the proposed Offering. These obligations arise under both the Confidentiality Agreement between QIH and Ridgeline dated July 1, 2022 (the "NDA") and under applicable securities laws restricting the use and dissemination of material non-public information.

Ridgeline should ensure that all investor-facing materials, including the Preliminary Offering Memorandum (v3), the Investor Presentation Deck, the pool stratification data, the historical performance data for QPF's receivables portfolio, and any other proprietary or non-public information, are not further disseminated to any party. To the extent copies of any such materials were provided to prospective investors during the roadshow or otherwise, Ridgeline should take commercially reasonable steps to confirm that such materials are treated by recipients in accordance with the confidentiality restrictions set forth in the applicable "click-through" or written confidentiality undertakings required as a condition of access to the virtual data room and receipt of marketing materials.

For the avoidance of doubt, Ridgeline's obligations under the NDA and any other existing confidentiality or non-disclosure agreements between the parties survive the suspension of the Offering and remain in full force and effect in accordance with their respective terms. This includes, without limitation, obligations relating to the return or destruction of confidential information upon request.

VIII. Reactivation and Reservation of Rights

QIH expressly reserves the right to reactivate the Offering and re-engage Ridgeline as structuring agent and lead bookrunner upon improvement of market conditions, at such time and on such terms as QIH may determine in its sole discretion.

Any reactivation of the Offering would be subject to, among other things: (a) updated pool data, as the initial pool as of the June 30, 2022 cut-off date — consisting of approximately $612,000,000 in aggregate principal balance across approximately 82,400 individual insurance premium finance loans — would need to be refreshed to reflect the then-current composition, performance characteristics, and credit quality of QPF's receivables portfolio; (b) refreshed preliminary or new credit ratings from Brindoval, Pinnacle, or such other rating agencies as QIH may designate; (c) updated transaction documentation reflecting any changes in applicable law, regulation, market conventions, or commercial terms; (d) updated legal opinions and due diligence; and (e) new engagement terms between QIH and Ridgeline (or any replacement placement agent) as may be appropriate under the circumstances then prevailing.

QIH also reserves the right, upon any reactivation, to engage alternative or additional placement agents, co-managers, or structuring advisors, to modify the capital structure of the Offering (including the number of tranches, tranche sizes, credit enhancement levels, and other structural features), and to make any other changes to the transaction that QIH deems appropriate. Nothing in this letter shall be construed to grant Ridgeline any exclusive or preferential right to participate in any future offering by QIH, QRF 2022-1, or any other QIH affiliate, although QIH acknowledges Ridgeline's significant contributions to the development of the transaction to date.

Nothing in this letter shall constitute a termination of the engagement between QIH and Ridgeline except as expressly set forth herein. However, QIH makes no commitment, whether express or implied, to reactivate the Offering and assumes no liability for any costs, expenses, lost profits, or other damages incurred by Ridgeline in anticipation of closing or otherwise in connection with the suspension. Ridgeline expressly acknowledges that QIH's decision to suspend the Offering is within QIH's sole and absolute discretion and that Ridgeline has no claim against QIH arising from or related to the suspension, except as may be expressly provided in the existing engagement letter with respect to documented reimbursable expenses.

IX. Contact Information and Next Steps

For any questions regarding this notification or the matters set forth in this letter, Ridgeline should contact the following individuals:

Douglas Carmichael Partner Calderwood & Harkness LLP 601 Lexington Avenue New York, NY 10022 Telephone: (212) 848-4127

Email: dcarmichael@calderwoodharkness.com

Nolan Whitford General Counsel Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, CT 06901 Telephone: (203) 564-2100

Email: nwhitford@quoruminsurance.com

Sandra Ling-Hwang Treasurer Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, CT 06901 Telephone: (203) 564-2244

Email: slinghwang@quoruminsurance.com

We request that Ridgeline confirm receipt of this letter and acknowledge the suspension of the Offering in writing within five (5) business days of the date hereof. Such confirmation may be delivered by email to Douglas Carmichael at the address set forth above, with a copy to Nolan Whitford.

We appreciate Ridgeline's efforts in connection with this transaction and look forward to working with your team in the event that market conditions permit a reactivation of the Offering in the future.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Partner

On behalf of Quorum Insurance Holdings Corp.

cc (via email):

Nolan Whitford, General Counsel, Quorum Insurance Holdings Corp. Sandra Ling-Hwang, Treasurer, Quorum Insurance Holdings Corp. Priya Raghavan, Chief Financial Officer, Quorum Insurance Holdings Corp. Harrison Collier, Partner, Calloway & Brandt LLP (Underwriter's Counsel) Megan O'Shaughnessy, Senior Associate, Calloway & Brandt LLP Gerald K. Fontaine, Senior Trust Officer, Calvoneth Trust Company, N.A. Diane Coletti, Managing Director, Northvane Bank, N.A. Yuki Nakamura, Associate, Calderwood & Harkness LLP Francesca Morano, Partner, Calderwood & Harkness LLP

Enclosures: None

Tranche	Principal Amount	% of Capital Structure	Indicative Spread (over SOFR)
Class A Notes	$375,000,000	75.0%	+168 bps
Class B Notes	$75,000,000	15.0%	+285 bps
Class C Notes	$35,000,000	7.0%	+450 bps
Tranche	Preliminary CUSIP
Class A Notes	74892TAA3
Class B Notes	74892TAB1
Class C Notes	74892TAC9
Tranche	Fee Rate	Principal Amount	Fee Amount
Class A Notes	0.30%	$375,000,000	$1,125,000
Class B Notes	0.45%	$75,000,000	$337,500
Class C Notes	0.60%	$35,000,000	$210,000
Total	$1,672,500

CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law 601 Lexington Avenue New York, NY 10022 Telephone: (212) 848-4000 Facsimile: (212) 848-4099 www.calderwoodharkness.com
November 14, 2022
VIA EMAIL AND OVERNIGHT COURIER
Mr. Julian Weatherstone Head of ABS Origination Ridgeline Capital Markets LLC 383 Madison Avenue, 14th Floor New York, NY 10179
cc: Rebecca Tran, Managing Director, Insurance Finance ABS, Ridgeline Capital Markets LLC (via email)
Re: Suspension of Offering — Quorum Receivables Funding 2022-1 LLC — $500,000,000 Asset-Backed Notes (Insurance Premium Finance Receivables)
Ridgeline Deal ID: RCM-IPF-2022-0041 Calderwood & Harkness Matter No. 1025-00007
Dear Mr. Weatherstone:
I. Introduction and Purpose of Letter
Calderwood & Harkness LLP writes on behalf of its client, Quorum Insurance Holdings Corp. ("QIH"), a Delaware corporation (NYSE: QIHC), with its principal offices located at 400 Atlantic Street, Suite 2200, Stamford, Connecticut 06901. We have been authorized by QIH to deliver this letter to Ridgeline Capital Markets LLC ("Ridgeline") in connection with the matters described below.
The purpose of this letter is to provide formal notification that QIH has determined to suspend the proposed $500,000,000 asset-backed securities offering (the "Offering") by Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1"), a Delaware limited liability company and special-purpose bankruptcy-remote entity, effective immediately as of November 14, 2022. As described in greater detail in this letter, the suspension applies to the entirety of the contemplated capital structure, including the Rule 144A / Regulation S private placement of: (i) Class A Notes in the aggregate principal amount of $375,000,000, (ii) Class B Notes in the aggregate principal amount of $75,000,000, and (iii) Class C Notes in the aggregate principal amount of $35,000,000 (collectively, the "Notes"), each tranche of which was to be backed by a pool of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a wholly owned subsidiary of QIH.
This decision follows the QIH Board of Directors' determination, communicated to Calderwood & Harkness by QIH's General Counsel on this date, that the Offering should be suspended indefinitely in light of the market conditions and economic considerations set forth in Section II below. The QIH Board of Directors reached this determination by unanimous written consent on November 13, 2022, and authorized Calderwood & Harkness to transmit this notification to Ridgeline and other transaction parties without delay.
II. Background and Market Conditions Precipitating Suspension
As you are aware, the transaction was launched in June 2022 following QIH management's assessment that favorable market conditions presented an opportunity to securitize a portion of QPF's insurance premium finance receivables portfolio. Calderwood & Harkness was retained as issuer's counsel on June 28, 2022, pursuant to an engagement letter executed on that date. Ridgeline Capital Markets LLC was engaged as structuring agent, lead bookrunner, and sole placement agent for the Offering, pursuant to an engagement letter between QIH and Ridgeline dated July 6, 2022.
In furtherance of the transaction, the requisite special-purpose vehicles were organized. QRF 2022-1 and Quorum Receivables Holding LLC ("QRH"), each a Delaware limited liability company, were formed on August 3, 2022, with QRH serving as the intermediate transferee in the two-step true sale structure and QRF 2022-1 serving as the issuing entity.
Preliminary credit ratings were obtained from two nationally recognized rating agencies. Brindoval Ratings Inc. ("Brindoval") assigned preliminary ratings of AAA(cr) to the Class A Notes, A(cr) to the Class B Notes, and BBB(cr) to the Class C Notes, as reflected in its pre-sale report dated August 22, 2022. Pinnacle Rating Services LLC ("Pinnacle") assigned preliminary ratings of Aaa(p) to the Class A Notes, A1(p) to the Class B Notes, and Baa2(p) to the Class C Notes, as reflected in its new issuance report dated August 29, 2022. Both sets of preliminary ratings were predicated on the capital structure, credit enhancement levels, and pool characteristics described in the respective rating agency models and reports.
The core transaction documentation — including the Indenture, the Receivables Sale Agreement, the Receivables Transfer Agreement, the Servicing Agreement, the Note Purchase Agreement, and the ancillary documents described in Section IV below — was the subject of extensive negotiation among the parties and their respective counsel. This documentation reached near-final execution draft status, reflected in version 3 and version 4 drafts, on or about October 12, 2022. At that stage, all material commercial, structural, and legal points had been resolved or substantially resolved, and the documentation was in a condition suitable for final review in anticipation of pricing and closing.
A virtual investor roadshow commenced on October 24, 2022, during which QIH management, QPF's Chief Operating Officer, and representatives of Ridgeline presented the transaction to prospective qualified institutional buyers and institutional accredited investors. The roadshow consisted of a series of virtual meetings and group calls over the course of approximately two weeks and concluded on November 2, 2022.
However, market conditions deteriorated significantly between the time of deal launch and the conclusion of the roadshow period. At the time the transaction was launched in June 2022, comparable AAA-rated insurance premium finance asset-backed securities were trading in the secondary market at spreads of approximately SOFR + 95 to 110 basis points. Based on this market environment, the Class A coupon guidance for the Offering was established at SOFR + 125 basis points, providing a modest new issue concession to attract investor participation while remaining within QIH's targeted cost-of-funds parameters.
By early November 2022, comparable spreads in the insurance premium finance ABS sector had widened materially, reflecting broader credit market volatility, rising interest rates, reduced investor risk appetite, and diminished demand for structured finance products. Comparable AAA-rated insurance premium finance ABS paper was trading at spreads of approximately SOFR + 160 to 175 basis points — a spread widening of approximately 65 to 80 basis points from levels prevailing at the time of deal launch.
Following the conclusion of the virtual investor roadshow on November 2, 2022, Ridgeline transmitted indicative pricing to QIH reflecting investor feedback and current market conditions. The indicative pricing was as follows:
At these indicative pricing levels, the implied all-in weighted average cost of funds for the Offering equals approximately 200.25 basis points over SOFR, calculated as follows:
(75.0% × 168 bps) + (15.0% × 285 bps) + (7.0% × 450 bps) = 126.00 + 42.75 + 31.50 = 200.25 bps over SOFR
This figure does not include the remaining 3.0% of the capital structure represented by the unrated overcollateralization amount, which bears no coupon but represents an additional retained cost to QIH.
The implied all-in weighted average cost of funds of SOFR + 200.25 basis points exceeds QIH's Board-approved maximum all-in weighted average cost-of-funds hurdle of SOFR + 175 basis points by approximately 25.25 basis points. The Board-approved hurdle was established based on QIH's internal capital planning models, the expected yield on the underlying receivables portfolio, required servicing fee coverage, and minimum return-on-equity thresholds for QPF's securitization program. At the indicative pricing levels reflected in Ridgeline's November 2, 2022 communication, the economics of the transaction are unworkable at current market levels, and proceeding to pricing and closing would not be in the best interests of QIH or its shareholders.
Accordingly, the QIH Board of Directors has determined that it is prudent to suspend the Offering at this time rather than proceed at pricing levels that would result in an unacceptable cost of funds.
III. Formal Notification of Suspension
Based on the foregoing, QIH hereby instructs Ridgeline Capital Markets LLC to take the following actions immediately upon receipt of this letter:
(a) Cessation of Marketing Activities. Ridgeline shall immediately cease all investor marketing activities in connection with the QRF 2022-1 Notes offering. This instruction applies to all forms of investor outreach, whether conducted by Ridgeline's sales force, syndicate desk, capital markets professionals, or any other personnel of Ridgeline or its affiliates.
(b) No Further Solicitations or Distributions. Ridgeline shall make no further solicitations of interest, distribute no further marketing materials (including, without limitation, the Preliminary Offering Memorandum, the Investor Presentation Deck, or any supplemental data or analysis), and conduct no further investor calls, meetings, or other communications in connection with the Offering.
(c) Withdrawal of Indications of Interest. Ridgeline shall withdraw any outstanding indications of interest received from prospective investors and shall promptly inform all prospective investors who received marketing materials or participated in roadshow presentations that the Offering has been suspended indefinitely. Such communications with prospective investors should be limited to a factual statement that the Offering has been suspended and should not include any characterization of the reasons for the suspension, QIH's financial condition, the status of the receivables pool, or the likelihood or timing of any future reactivation, unless QIH has expressly approved the content of such communication in advance.
(d) No Pricing, Allocation, or Closing Activity. Ridgeline shall refrain from pricing, allocating, settling, or otherwise proceeding toward closing on any tranche of the Notes, whether Class A, Class B, or Class C, or any combination thereof.
For the avoidance of doubt, the action taken by QIH pursuant to this letter constitutes a suspension, not a termination, of the Offering. The transaction is being placed in dormant status pending improvement of market conditions and further assessment by QIH's management and Board of Directors. QIH expressly reserves the right to reactivate the Offering at a future date, subject to the terms and conditions described in Section VIII below. Nothing in this letter should be construed as a definitive abandonment of the transaction or a waiver of any rights that QIH, QRF 2022-1, or any other transaction party may have in connection therewith.
IV. Status of Transaction Documents
As noted above, the core transaction documentation reached near-final or execution draft status as of October 12, 2022, and remains in that condition as of the date hereof. For the record, and for the benefit of all parties in the event of a future reactivation, we set forth below the current status of the principal transaction documents:
A. Transaction Agreements:
(i) Indenture (execution draft v4, dated October 12, 2022), by and between QRF 2022-1, as issuer, and Calvoneth Trust Company, N.A., as indenture trustee, note registrar, paying agent, and custodian of the collection accounts;
(ii) Note Purchase Agreement (execution draft v3, dated October 12, 2022), among QRF 2022-1, QIH, and Ridgeline Capital Markets LLC, as initial purchaser;
(iii) Receivables Sale Agreement (execution draft v3, dated October 12, 2022), between QPF, as originator and seller, and QRH, as purchaser;
(iv) Receivables Transfer Agreement (execution draft v3, dated October 12, 2022), between QRH, as transferor, and QRF 2022-1, as transferee;
(v) Servicing Agreement (execution draft v3, dated October 12, 2022), among QRF 2022-1, QPF, as servicer, and Calvoneth Trust Company, N.A., as indenture trustee;
(vi) Back-Up Servicing Agreement (execution draft v2, dated October 12, 2022), among QRF 2022-1, QPF, Northvane Bank, N.A., as back-up servicer, and Calvoneth Trust Company, N.A., as indenture trustee;
(vii) Liquidity Facility Agreement (execution draft v2, dated October 12, 2022);
(viii) Administration Agreement (execution draft v2, dated October 12, 2022);
(ix) Account Control Agreement (execution draft v2, dated October 12, 2022);
(x) Custodian Agreement (draft);
(xi) Grant of Security Interest (execution draft v2, dated October 12, 2022); and
(xii) Performance Guaranty (execution draft v1, dated October 12, 2022).
B. Offering Documents:
(i) Preliminary Offering Memorandum (v3, dated October 12, 2022); and
(ii) Investor Presentation Deck (dated October 20, 2022).
C. Legal Opinions:
All draft legal opinions prepared in connection with the Offering, including the true sale opinions (QPF-to-QRH and QRH-to-QRF 2022-1), the enforceability opinion, the UCC perfection opinion, the tax characterization opinion (regarding REMIC/grantor trust/partnership/disregarded entity status), the no-registration opinion under the Securities Act of 1933, the Delaware formation and good standing opinions for QRF 2022-1 and QRH, and the non-consolidation opinions, remain in draft form only. None of these opinions were finalized or delivered to any party, and no reliance should be placed upon any draft opinions circulated during the course of the transaction.
D. UCC Filings:
UCC-1 financing statements were prepared in draft form covering the following filings: (a) QPF, as debtor, in favor of QRH, as secured party; (b) QRH, as debtor, in favor of QRF 2022-1, as secured party; and (c) QRF 2022-1, as debtor, in favor of Calvoneth Trust Company, N.A., as indenture trustee and secured party. None of these financing statements were filed with the Delaware Secretary of State or any other filing office, and no UCC liens are on record in connection with this transaction.
E. Closing Deliverables:
Closing certificates, officer's certificates, secretary's certificates, and related closing deliverables were drafted but never executed by any party. No bring-down good standing certificates were ordered.
Calderwood & Harkness will maintain the complete documentation file, including all drafts, work product, correspondence, and related materials, in its records in accordance with the firm's document retention policies. Calderwood & Harkness stands ready to update all documentation to reflect any changed circumstances — including updated pool data, revised economic terms, changes in applicable law or regulation, and refreshed representations and warranties — in the event QIH determines to reactivate the Offering at a future date.
V. Preliminary Ratings and Rating Agency Engagement
The preliminary credit ratings assigned by Brindoval Ratings Inc. (Engagement No. CR-SF-2022-08812) and Pinnacle Rating Services LLC (Engagement No. PRS-2022-ABS-3347) remain in preliminary status as of the date hereof. These preliminary ratings were issued subject to receipt of final documentation, satisfaction of closing conditions, and confirmation of final pool composition and deal economics. No final ratings have been assigned, and the preliminary ratings have not been affirmed, confirmed, or published in any final form.
QIH will separately communicate with the respective rating agency analysts — Andrew Petrosian at Brindoval and Monica Sung at Pinnacle — regarding the suspension of the Offering and the status of the preliminary ratings, including whether the preliminary ratings should be formally withdrawn or maintained in dormant status pending potential reactivation. Calderwood & Harkness will coordinate with QIH on the content and timing of those communications.
In the interim, Ridgeline should not make any representations to investors or third parties regarding the continued availability, validity, or applicability of the preliminary ratings. Any investor or counterparty inquiries regarding the preliminary ratings should be directed to QIH's General Counsel or to Calderwood & Harkness.
Additionally, the preliminary CUSIPs assigned to the Notes by CUSIP Global Services have not been finalized. The preliminary CUSIPs are as follows:
These preliminary CUSIPs should not be referenced in any further communications, marketing materials, or filings. Ridgeline should not request activation or finalization of these CUSIPs with CUSIP Global Services or The Depository Trust Company.
VI. Fees and Expenses
We note that the placement fees payable to Ridgeline under the Note Purchase Agreement were structured as follows and were in each case contingent upon the successful closing of the Offering:
Because the Offering has been suspended and closing will not occur, the placement fees set forth above are not payable and no obligation to pay such fees has arisen or will arise unless and until the Offering is reactivated and successfully closed.
QIH requests that Ridgeline provide a final accounting of any out-of-pocket expenses incurred by Ridgeline in connection with the transaction, including but not limited to roadshow production and logistics costs, travel expenses, printing and marketing material preparation costs, virtual data room hosting fees, Vireo Software and analytics costs, and any other documented out-of-pocket expenditures. QIH requests that such final accounting be provided within thirty (30) calendar days of the date of this letter.
For context, we note that total sunk costs incurred by QIH to date in connection with the transaction are approximately $2,555,000, broken down as follows:
•  Accrued legal fees (Calderwood & Harkness LLP): approximately $1,950,000
•  Rating agency fees (Brindoval Ratings Inc. and Pinnacle Rating Services LLC, combined): approximately $420,000
•  Structuring, due diligence, and third-party advisory costs: approximately $185,000
These figures are provided for informational purposes and do not include any amounts that may be owed to Ridgeline for reimbursable out-of-pocket expenses. Any reimbursement obligations owed to Ridgeline under the terms of the existing engagement letter between QIH and Ridgeline dated July 6, 2022, will be addressed separately by QIH's Treasurer, Sandra Ling-Hwang, following receipt of Ridgeline's final accounting. QIH reserves the right to review and, as appropriate, dispute any claimed expenses that are not adequately documented or that fall outside the scope of reimbursable expenses as defined in the engagement letter.
VII. Confidentiality
We take this opportunity to remind Ridgeline of its confidentiality obligations with respect to the transaction, QIH's financial information, the receivables pool data, and all non-public information received by Ridgeline and its personnel in connection with the proposed Offering. These obligations arise under both the Confidentiality Agreement between QIH and Ridgeline dated July 1, 2022 (the "NDA") and under applicable securities laws restricting the use and dissemination of material non-public information.
Ridgeline should ensure that all investor-facing materials, including the Preliminary Offering Memorandum (v3), the Investor Presentation Deck, the pool stratification data, the historical performance data for QPF's receivables portfolio, and any other proprietary or non-public information, are not further disseminated to any party. To the extent copies of any such materials were provided to prospective investors during the roadshow or otherwise, Ridgeline should take commercially reasonable steps to confirm that such materials are treated by recipients in accordance with the confidentiality restrictions set forth in the applicable "click-through" or written confidentiality undertakings required as a condition of access to the virtual data room and receipt of marketing materials.
For the avoidance of doubt, Ridgeline's obligations under the NDA and any other existing confidentiality or non-disclosure agreements between the parties survive the suspension of the Offering and remain in full force and effect in accordance with their respective terms. This includes, without limitation, obligations relating to the return or destruction of confidential information upon request.
VIII. Reactivation and Reservation of Rights
QIH expressly reserves the right to reactivate the Offering and re-engage Ridgeline as structuring agent and lead bookrunner upon improvement of market conditions, at such time and on such terms as QIH may determine in its sole discretion.
Any reactivation of the Offering would be subject to, among other things: (a) updated pool data, as the initial pool as of the June 30, 2022 cut-off date — consisting of approximately $612,000,000 in aggregate principal balance across approximately 82,400 individual insurance premium finance loans — would need to be refreshed to reflect the then-current composition, performance characteristics, and credit quality of QPF's receivables portfolio; (b) refreshed preliminary or new credit ratings from Brindoval, Pinnacle, or such other rating agencies as QIH may designate; (c) updated transaction documentation reflecting any changes in applicable law, regulation, market conventions, or commercial terms; (d) updated legal opinions and due diligence; and (e) new engagement terms between QIH and Ridgeline (or any replacement placement agent) as may be appropriate under the circumstances then prevailing.
QIH also reserves the right, upon any reactivation, to engage alternative or additional placement agents, co-managers, or structuring advisors, to modify the capital structure of the Offering (including the number of tranches, tranche sizes, credit enhancement levels, and other structural features), and to make any other changes to the transaction that QIH deems appropriate. Nothing in this letter shall be construed to grant Ridgeline any exclusive or preferential right to participate in any future offering by QIH, QRF 2022-1, or any other QIH affiliate, although QIH acknowledges Ridgeline's significant contributions to the development of the transaction to date.
Nothing in this letter shall constitute a termination of the engagement between QIH and Ridgeline except as expressly set forth herein. However, QIH makes no commitment, whether express or implied, to reactivate the Offering and assumes no liability for any costs, expenses, lost profits, or other damages incurred by Ridgeline in anticipation of closing or otherwise in connection with the suspension. Ridgeline expressly acknowledges that QIH's decision to suspend the Offering is within QIH's sole and absolute discretion and that Ridgeline has no claim against QIH arising from or related to the suspension, except as may be expressly provided in the existing engagement letter with respect to documented reimbursable expenses.
IX. Contact Information and Next Steps
For any questions regarding this notification or the matters set forth in this letter, Ridgeline should contact the following individuals:
Douglas Carmichael Partner Calderwood & Harkness LLP 601 Lexington Avenue New York, NY 10022 Telephone: (212) 848-4127
Email: dcarmichael@calderwoodharkness.com
Nolan Whitford General Counsel Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, CT 06901 Telephone: (203) 564-2100
Email: nwhitford@quoruminsurance.com
Sandra Ling-Hwang Treasurer Quorum Insurance Holdings Corp. 400 Atlantic Street, Suite 2200 Stamford, CT 06901 Telephone: (203) 564-2244
Email: slinghwang@quoruminsurance.com
We request that Ridgeline confirm receipt of this letter and acknowledge the suspension of the Offering in writing within five (5) business days of the date hereof. Such confirmation may be delivered by email to Douglas Carmichael at the address set forth above, with a copy to Nolan Whitford.
We appreciate Ridgeline's efforts in connection with this transaction and look forward to working with your team in the event that market conditions permit a reactivation of the Offering in the future.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner
On behalf of Quorum Insurance Holdings Corp.
cc (via email):
Nolan Whitford, General Counsel, Quorum Insurance Holdings Corp. Sandra Ling-Hwang, Treasurer, Quorum Insurance Holdings Corp. Priya Raghavan, Chief Financial Officer, Quorum Insurance Holdings Corp. Harrison Collier, Partner, Calloway & Brandt LLP (Underwriter's Counsel) Megan O'Shaughnessy, Senior Associate, Calloway & Brandt LLP Gerald K. Fontaine, Senior Trust Officer, Calvoneth Trust Company, N.A. Diane Coletti, Managing Director, Northvane Bank, N.A. Yuki Nakamura, Associate, Calderwood & Harkness LLP Francesca Morano, Partner, Calderwood & Harkness LLP
Enclosures: None
Tranche | Principal Amount | % of Capital Structure | Indicative Spread (over SOFR)
Class A Notes | $375,000,000 | 75.0% | +168 bps
Class B Notes | $75,000,000 | 15.0% | +285 bps
Class C Notes | $35,000,000 | 7.0% | +450 bps
Tranche | Preliminary CUSIP
Class A Notes | 74892TAA3
Class B Notes | 74892TAB1
Class C Notes | 74892TAC9
Tranche | Fee Rate | Principal Amount | Fee Amount
Class A Notes | 0.30% | $375,000,000 | $1,125,000
Class B Notes | 0.45% | $75,000,000 | $337,500
Class C Notes | 0.60% | $35,000,000 | $210,000
Total | $1,672,500

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