SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)*
ESG Re Limited
(Name of Issuer)
Common Shares, $1.00 par value
(Title of Class of Securities)
G31215109
(CUSIP Number)
Mr. Kenneth F. Cooper
Vicuna Advisors LLC
230 Park Avenue
7th Floor
New York, NY 10169
(212) 499-2940
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 30, 2000
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |X|
NOTE. Schedules filed in paper format shall include a signed original and
five copies of the Schedule, including all exhibits. SEE Rule 13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however, see
the notes).
<PAGE>
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Vicuna Advisors LLC
TIN: 13-4006560
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|_|
(b)|_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
Not Applicable
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED Zero
BY
EACH ------------------------------------------------------------
REPORTING SHARED VOTING POWER
PERSON 8
WITH 1,159,600 shares
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
Zero
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,159,600 shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,159,600 shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW |_|
(11) EXCLUDES CERTAIN SHARES*
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.8%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
--------------------------------------------------------------------------------
2
<PAGE>
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Vicuna Partners LLC
TIN: 13-4006612
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED Zero
BY
EACH ------------------------------------------------------------
REPORTING SHARED VOTING POWER
PERSON 8
WITH 1,159,600 shares
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
Zero
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,159,600 shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,159,600 shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW |_|
(11) EXCLUDES CERTAIN SHARES*
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.8%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
--------------------------------------------------------------------------------
3
<PAGE>
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Vicuna Capital I L.P.
TIN: 13-4006625
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|_|
(b)|_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED
BY 856,840 shares
EACH
REPORTING ------------------------------------------------------------
PERSON 8 SHARED VOTING POWER
WITH Zero
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
856,840 shares
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
Zero
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
856,840 shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW |_|
(11) EXCLUDES CERTAIN SHARES*
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.3%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
4
<PAGE>
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WNP Investment Partnership L.P.
TIN: 13-4006626
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|_|
(b)|_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED
BY 302,760 shares
EACH
REPORTING ------------------------------------------------------------
PERSON 8 SHARED VOTING POWER
WITH Zero
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
302,760 shares
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
Zero
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
302,760 shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW |_|
(11) EXCLUDES CERTAIN SHARES*
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.6%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
--------------------------------------------------------------------------------
5
<PAGE>
--------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Joshua G. Welch
--------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |_|
--------------------------------------------------------------------------------
3 SEC USE ONLY
--------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
--------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_|
IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
--------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
--------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED Zero
BY
EACH ------------------------------------------------------------
REPORTING SHARED VOTING POWER
PERSON 8
WITH 1,159,600 shares
------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
Zero
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,159,600 shares
--------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,159,600 shares
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW |_|
(11) EXCLUDES CERTAIN SHARES*
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.8%
--------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
--------------------------------------------------------------------------------
6
<PAGE>
This Amendment No. 2 to Statement on Schedule 13D amends the Statement on
Schedule 13D relating to the Common Shares, $1.00 par value (the "Common
Stock"), of ESG Re Limited (the "Issuer") filed by the Reporting Persons (as
defined below) on March 17, 2000, as amended by Amendment No. 1 filed on October
17, 2000. The Statement on Schedule 13D amended the Schedule 13G filed by the
Reporting Persons on November 22, 1999, as amended by Amendment No. 1 filed on
February 14, 2000.
This Statement is being filed by each of the following persons (the
"Reporting Persons") pursuant to Rule 13d-1(k) promulgated by the Securities and
Exchange Commission (the "Commission") pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"): Vicuna Advisors LLC, a
Delaware limited liability company ("Advisors"), Vicuna Partners LLC, a Delaware
limited liability company ("Partners"), Vicuna Capital I L.P., a Delaware
limited partnership ("Capital"), WNP Investment Partnership, L.P., a Delaware
limited partnership ("WNP"), and Joshua G. Welch ("Welch").
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
The source of funds used to purchase the shares of Common Stock owned by
the Reporting Persons (the "Shares") was working capital of Capital and WNP. The
amount of such funds was approximately $6,767,000 for the Shares owned by
Capital and approximately $2,417,000 for the Shares owned by WNP.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
The Reporting Persons initially acquired shares of Common Stock in the
ordinary course of business for investment purposes. The Reporting Persons'
intention was to review their investment in the Issuer on a continuing basis
and, depending upon price and availability of securities of the Issuer,
subsequent developments affecting the Issuer, the Issuer's business and
prospects, general stock market and economic conditions, tax considerations and
other factors deemed relevant, to consider increasing or decreasing the size of
their investment in the Issuer.
On November 30, 2000, Joshua G. Welch, on behalf of the Reporting Persons,
sent a letter to the Board of Directors of the Issuer informing them that they
had been remiss in their duty to manage the Issuer and urging them to take the
following steps:
A prompt and orderly liquidation of the Issuer designed to maximize shareholder
value;
The dismissal of the present management of the Issuer;
The retention of expert advisors and other temporary executive talent to manage
the sale or run off of the Issuer's insurance business and investment
securities; and
The appointment of independent directors to oversee this entire liquidation.
The letter also informed the Board of Directors that the Reporting Persons would
propose their own slate of directors if action were not taken. A copy of the
letter sent on November 30, 2000 on behalf of the Reporting Persons is attached
hereto as Exhibit B and is hereby incorporated herein by reference.
The Reporting Persons may take a number of actions in order to insure that
the Issuer and its Board of Directors take appropriate action to maximize
shareholder value. They may communicate and discuss their views with other
shareholders of the Issuer and members of the Board. The Reporting Persons may
communicate with financial institutions and other third parties concerning such
parties' interest in possibly acquiring the Issuer or some or all of its assets.
They may retain an investment banker to help them evaluate their options or to
solicit interest and/or bids from potential acquirors. The Reporting Persons may
also make proposals to the Issuer's Board of Directors and/or shareholders, seek
representation on the Board of Directors and solicit proxies and written
consents from other shareholders. In the future, The Reporting Persons may
decide to purchase additional shares of the Common Stock, or sell part or all of
their current holdings of Common Stock. The Reporting Persons reserve the right
to exercise any and all of their respective rights as shareholders of the Issuer
in a manner consistent with their equity interests.
Except as set forth above, neither the Reporting Persons nor, to the best
knowledge of the Reporting Persons, any person listed in Schedule A attached
to the original Schedule 13D, has any
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present plans or intentions which relate to or would result in: (i) the
acquisition by any person of any additional securities of the Issuer, or the
disposition of securities of the Issuer; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (iii) the sale or transfer of a material
amount of assets of the Issuer or any of its subsidiaries; (iv) any change in
the present board of directors or management of the Issuer, including any plans
or proposals to change the number or term of directors or to fill any existing
vacancies on the board; (v) any material change in the present capitalization or
dividend policy of the Issuer; (vi) any other material change in the Issuer's
business or corporate structure; (vii) any other material change in the Issuer's
business or corporate structure; (viii) changes in the Issuer's charter, bylaws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person; (viii) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (ix) a class of equity security of
the Issuer becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or (xi) any action similar to
any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
As of the date hereof, Capital is the beneficial owner 856,840 shares of
Common Stock and WNP is the beneficial owner 302,760 shares of Common Stock. By
virtue of its status as general partner of Capital and WNP, Partners might be
deemed to be the beneficial owner of the securities owned by Capital and WNP. By
virtue of its status as investment adviser to Capital and WNP, Advisors might be
deemed to be the beneficial owner of the securities owned by Capital and WNP. By
virtue of his status as Managing Member of Advisors and Partners, Welch might be
deemed to be the beneficial owner of the securities owned by Capital and WNP.
Advisors, Partners and Welch each disclaims beneficial ownership of the
securities owned by Capital and WNP.
As of the date hereof, Capital is the beneficial owner of 7.3% of the
Common Stock and WNP is the beneficial owner of 2.6% of the Common Stock. The
percentages of the outstanding Common Stock reported in this Schedule 13D are
calculated on the basis of 11,787,108 shares of Common Stock issued and
outstanding on November 9, 2000, as reported in the Issuer's Quarterly Report on
Form 10-Q for the quarter ended September 30,2000.
No transactions were effected by the Reporting Persons or, to the best
knowledge of the Reporting Persons, any of the persons listed on Schedule A
attached to the original Schedule 13D, in the Common Stock during the 60 days
prior to the date of this Amendment No. 2 to Schedule 13D, except for the
following transactions effected by Capital and WNP:
Transactions by Capital
Date Purchase/Sale No. of Shares Price/Share Market
11/15/2000 Purchase 33,440 $1.9375 NASDAQ
Transactions by WNP
Date Purchase/Sale No. of Shares Price/Share Market
11/15/2000 Purchase 10,560 $1.9375 NASDAQ
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
---------------------------------
Exhibit A: Agreement of Joint Filing, dated as of November 30, 2000,
among Advisors, Partners, Capital, WNP and Welch.
Exhibit B: Letter dated November 30, 2000 to the Board of Directors of
the Issuer.
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 30, 2000
VICUNA ADVISORS LLC
By: /s/ Joshua G. Welch
------------------------------------
Joshua G. Welch
Managing Member
VICUNA PARTNERS LLC
By: /s/ Joshua G. Welch
-------------------------------------
Joshua G. Welch
Managing Member
VICUNA CAPITAL I, L.P.
By: Vicuna Partners LLC, General Partner
By: /s/ Joshua G. Welch
-------------------------------------
Joshua G. Welch
Managing Member
WNP Investment Partnership, L.P.
By: Vicuna Partners LLC, General Partner
By: /s/ Joshua G. Welch
-------------------------------------
Joshua G. Welch
Managing Member
/s/ Joshua G. Welch
-------------------------------
Joshua G. Welch
9
<PAGE>
EXHIBIT A
AGREEMENT RE JOINT FILING OF
SCHEDULE 13D
------------
In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act
of 1934, as amended, the undersigned hereby agree that Amendment No. 2 to the
Schedule 13D dated November 30, 2000 relating to the Common Shares, $1.00 par
value, of ESG Re Limited as the same may be amended from time to time hereafter,
is being filed with the Securities and Exchange Commission on behalf of each of
them.
Dated: November 30, 2000
VICUNA ADVISORS LLC
By: /s/ Joshua G. Welch
------------------------------------
Joshua G. Welch
Managing Member
VICUNA PARTNERS LLC
By: /s/ Joshua G. Welch
-------------------------------------
Joshua G. Welch
Managing Member
VICUNA CAPITAL I, L.P.
By: Vicuna Partners LLC, General Partner
By: /s/ Joshua G. Welch
-------------------------------------
Joshua G. Welch
Managing Member
WNP Investment Partnership, L.P.
By: Vicuna Partners LLC, General Partner
By: /s/ Joshua G. Welch
-------------------------------------
Joshua G. Welch
Managing Member
/s/ Joshua G. Welch
-------------------------------
Joshua G. Welch
10
<PAGE>
EXHIBIT B
Letterhead of Vicuna Advisors LLC
November 30, 2000
The Board of Directors
ESG Re Limited
Skandia International House
16 Church Street
Hamilton, HM 11
Bermuda
Gentlemen:
Funds under our management hold 1,159,600 shares of ESG Re Limited ("ESG"). We
have read Peter Collery's letter to you dated November 16, 2000 and we find it
compelling. This company lacks the capital, the rating, the management ability,
the competitive advantage, and the track record to afford another attempt at
"returning to profitability". Any strategy other than liquidation or winding
down of the enterprise is grounded in something other than fact and economic
reality. We believe that you have mishandled the affairs of the company. We
would like to emphasize that, based on advice received from our Bermuda counsel,
each director has unlimited personal liability for losses incurred by the
company by the breach of their fiduciary duty.
Please recall that subsequent to assuming the position of CEO in September of
1999 Mr. Head made numerous assertions about writing only profitable business.
Contrary to these promises the company now indicates that business which was
written under his stewardship since September 1999 was substantially loss
generating. Also be aware that for the period 6/30/99 through 9/30/00 this
company has lost $7.87/share of book value, or 45% of its net worth per share.
By your inaction you have endorsed the recommendations of an individual whose
judgment and command of the enterprise are clearly impaired.
Mr. Head's conduct speaks for itself as ineffective; his tenure in office has
resulted in a material deterioration in shareholder value. The Board has sat
idly by and watched this happen. It is the Board's inaction, rather than action,
that constitutes a breach of fiduciary duty. We are bothered by the notion that
under these circumstances Mr. Head has credibility with the Board of Directors
when he certainly has no credibility with the stock market and the rating
agencies. As board members you should be aware of not only the deterioration of
the financial condition of the company but also that this stock has lost 90% of
its value since the initial public offering.
In light of the continued deterioration of ESG's value we have concluded that
the following steps must be taken in order to protect the shareholders'
interests:
o A prompt and orderly liquidation of ESG designed to maximize shareholder
value;
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o The dismissal of the present management of ESG;
o The retention of expert advisors and other temporary executive talent to
manage the sale or run off of the company's insurance business and
investment securities; and
o The appointment of independent directors to oversee this entire
liquidation.
If action is not taken promptly we will propose our own slate of independent
directors and take whatever other steps are in the interests of ESG and its
shareholders.
I look forward to hearing from you.
Sincerely,
Joshua G. Welch
Managing Partner
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