SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 28, 1997
HOME HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19347 13-3584978
(State of Incorporation) (Commission file number) (I.R.S. Employer
Identification No.)
59 Maiden Lane, New York, New York 10038-4548
(Address or principal executive office) (Zip Code)
Registrant's telephone number including area code (212) 530-6600
Item 2. Acquisition or Disposition of Assets
On March 28, 1997, The Home Insurance Company
("Home Insurance") completed the reorganization (the
"Reorganization") of one of its direct subsidiaries,
Gruntal Financial Corp. ("GFC"). The Reorganization was
consummated pursuant to a Reorganization Agreement, dated
February 24, 1997, between GFC and The 1880 Group LLC
("The 1880 Group"), under which GFC was restructured as a
limited liability company, Gruntal Financial, L.L.C.
("Gruntal Financial"), and partially transferred to The
1880 Group. GFC's business includes securities
underwriting, sales and trading, discount brokerage,
merchant banking, financial advisory services, investment
research, correspondent brokerage services, asset
management and life insurance agency.
Home Insurance is a New Hampshire-domiciled
property and casualty insurer and a direct, wholly-owned
subsidiary of the Registrant. The 1880 Group is a
limited liability company organized under the laws of the
State of Delaware, the members of which include Robert P.
Rittereiser, GFC's former chairman and chief executive
officer, and several other former GFC officers including,
but not limited to, Lee Fensterstock, formerly President
and Chief Operating Officer, Joanne T. Marren, formerly
Executive Vice President and General Counsel, and Henry
Gottmann, formerly Executive Vice President
(collectively, "Management").
In connection with the Reorganization, Gruntal
Financial issued several classes of securities to GFC and
The 1880 Group, including preferred securities, with a
face amount of approximately $235 million in the
aggregate. As a result of the Reorganization, GFC owns
40% of the common interest in Gruntal Financial and The
1880 Group owns 60% of the common interest in Gruntal
Financial. In connection with the issuance of certain
preferred securities to GFC, Home Insurance and Centre
Reinsurance Dublin, an affiliate of the Zurich Insurance
Company, entered into a swap agreement intended to ensure
that Home Insurance's investment in Gruntal Financial
yields at least $155.5 million plus a 7.5% per annum rate
of return thereon, subject to certain modifications with
respect to certain distributions and sales proceeds of
the common and preferred interests of Gruntal Financial.
In connection with the Reorganization,
Management entered into management services agreements
with The 1880 Group which, in turn, will provide such
services to Gruntal Financial.
Also in connection with the Reorganization,
GFC, which holds Home Insurance's interest in Gruntal
Financial, changed its name to Home Financial Corp,
restructured its board of directors and appointed new
officers to replace those who resigned to take positions
with Gruntal Financial.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
The following financial statements, pro forma
financial information and exhibits are filed as part of
this Form 8-K:
(a) Financial Statements or Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
The Reorganization involved the issuance of
several classes of securities to GFC and The 1880 Group
as follows: (i) Gruntal Financial issued to GFC
securities called Preferred A Interests in a nominal
amount of $155.5 million and securities called Preferred
B Interests in a nominal amount of $70 million; (ii)
Gruntal Financial issued to The 1880 Group securities
called Preferred C Interests in an approximate nominal
amount of $9 million; and (iii) Gruntal Financial issued
a class of securities called Common Interests, 40% of
which have been issued to GFC, and 60% of which have been
issued to The 1880 Group.
As a result of the partial transfer of GFC to
Management, Gruntal Financial will be accounted for as an
equity investment and will no longer be a consolidated
subsidiary. The following unaudited pro forma
consolidated balance sheet is presented as if the
restructuring took place December 31, 1996. The
unaudited pro forma consolidated income statement for the
year ended December 31, 1996 is presented as if the
restructuring occurred on January 1, 1996.
The pro forma financial data is presented for
informational purposes and should not be construed to be
indicative of the actual results of the Registrant for
periods presented or future results of operations of the
Registrant. The pro forma adjustments are described in
the accompanying notes presented herein.
Home Holdings Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 1996
($ millions) Pro Forma Pro
Historical Adjustments Forma
ASSETS
Insurance investments $1,292 -- $1,292
Cash 36 1 37
Premiums receivable 290 290
Funds held by affiliate 248 248
Reinsurance receivables 2,765 2,765
Securities broker-dealer 392 (392) --
investments
Receivables from brokers, 2,258 (2,258) --
dealer and customers
Investment in securities 155 155
broker-dealer
Other assets 312 (142) 170
________ _______ _______
Total assets $7,593 ($2,636) $4,957
======== ======== ======
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Liabilities:
Unpaid loss and loss $5,687 $ -- $5,687
adjustment expenses
Payable to brokers, dealers 2,060 (2,060) --
and customers
Debt of securities broker- 246 (246) --
dealer
Corporate debt 567 567
Other liabilities 572 (322) 250
______ ________ ______
Total liabilities 9,132 (2,628) 6,504
====== ======== ======
Stockholders' Deficiency
Paid-in capital 777 777
Deficit (2,320) (8) (2,328)
Unrealized gains on insurance 6 6
investments
Unrealized currency (2) (2)
translation adjustments _______ ________ _______
Total stockholders' (1,539) (8) (1,547)
deficiency _______ ________ _______
Total liabilities and $7,593 ($2,636) $4,957
stockholders' deficiency ====== ======== ======
See accompanying notes to pro forma consolidated
financial information.
Home Holdings Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Income Statement
For the Year Ended December 31, 1996
($ millions) Pro Forma Pro
Historical Adjustments Forma
REVENUES
Net earned premiums $116 $116
Insurance net investment 146 23 169
income
Insurance realized capital 9 9
gains
Securities broker-dealer 442 (442) --
operations ______ _______ _____
Total revenues 713 (419) 294
OPERATING EXPENSES
Losses and loss adjustment 588 588
expenses
Policy acquisition and other 120 120
insurance expenses
Securities broker-dealer 417 (417) --
operations
Corporate interest expense 49 49
______ _______ _____
Total expenses 1,174 (417) 757
Loss before income taxes (461) (2) (463)
Income tax expense (7) (7)
_______ _______ _____
NET LOSS ($468) ($2) $470
======= ======= =====
See accompanying notes to pro forma consolidated
financial information.
Notes to unaudited pro forma consolidated financial
information
The accompanying pro forma consolidated balance
sheet as of December 31, 1996 reflects adjustments to
account for the investment in Gruntal Financial using the
equity method of accounting. Pro forma adjustments to
the balance sheet also include the impact of transaction
expenses at closing of approximately $8 million.
The pro forma consolidated income statement for the
year ended December 31, 1996 reflects adjustments for use
of the equity method of accounting and adjustments for
dividends that would have been paid under the terms of
the Reorganization, whereby Gruntal Financial has issued
various preferred securities to GFC and The 1880 Group.
Dividend income to GFC from the Preferred A Interest of
$12 million and the Preferred B Interest of $11 million
are reflected in the pro forma income statement.
Additionally, The 1880 Group was allocated $2 million of
dividend income for the Preferred C Interest. The
transaction expenses of approximately $8 million were not
considered in the pro forma consolidated income
statement.
(c) Exhibits.
(2.1) Reorganization Agreement, dated February
24, 1997, between GFC and The 1880 Group
(incorporated by reference to the
Registrant's Report on Form 8-K filed on
February 25, 1997);
(99.1) Form of Gruntal Financial, L.L.C.
Agreement, between GFC and The 1880 Group
(attached to the Reorganization Agreement
as Exhibit 3.1C) (incorporated by
reference to the Registrant's Report on
Form 8-K filed on February 25, 1997);
(99.2) Form of Swap and Investment Management
Amendment, by and among Home Insurance and
Centre Reinsurance Dublin (attached to the
Reorganization Agreement as Exhibit 3.1E)
(incorporated by reference to the
Registrant's Report on Form 8-K filed on
February 25, 1997); and
(99.3) Press release issued on February 25, 1997
(incorporated by reference to the
Registrant's Report on Form 8-K filed on
February 25, 1997).
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
HOME HOLDINGS INC.
Dated: April 14, 1997 By: /s/ Richard H. Hershman
____________________________
Richard H. Hershman
(Principal Financial and
Accounting Officer through the
Services Agreement, dated June
12, 1995, between Risk
Enterprise Management Limited, a
Delaware corporation, and Home
Insurance)
