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Note 20 - Subsequent Events
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Subsequent Events [Text Block]

20.         Subsequent Events

 

Fednat Underwriters, Inc. Bankruptcy & Related Proof of Claim

 

On January 26, 2023, the United States Bankruptcy Court for the Southern District of Florida, Ft. Lauderdale Division, entered an order (the “Order”) granting a motion from the debtors (including FNU, as defined below) pursuant to Section 365(a) of the Bankruptcy Code authorizing such debtors to reject that certain Management Advisory Services Agreement dated and effective as of July 1, 2022 (the “Advisory Services Agreement”) between HGMA and FedNat Underwriters, Inc. (“FNU”). Based on the Order, the Advisory Services Agreement is deemed rejected as of December 12, 2022.

 

As disclosed in a Current Report on Form 8-K filed with the SEC on December 12, 2022, on December 11, 2022, FedNat Holding Company (“FedNat”) and certain of its wholly owned subsidiaries, including FNU, filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida in order to maximize value for all stakeholders.  As part of the Chapter 11 process, FedNat will evaluate all strategic alternatives to maximize value for stakeholders, whether that be a reorganization of its business or a sale of its assets.

 

Effective with the rejection of the Advisory Services Agreement, the Company will no longer earn compensation for the remaining duration of the agreement.  On February 21, 2023, the Company filed a proof of claim for $609,771 of unsecured claims for compensation earned pre-petition pursuant to the Advisory Services Agreement.  The Company also filed a claim for post-petition damages arising from the rejection of the agreement prior to its contractual end date.

 

S&L Note Default

 

As disclosed in Note 4 of the accompanying consolidated financial statements, the S&L Note matured on March 2, 2023.  S&L has informed the Company that it will not be able to pay the Company any amounts outstanding including principal or interest due, upon maturity.  As December 31, 2022, the Company has fully impaired the note balance and any future recoveries, if any, will be recognized as Other Income when the recoveries are recognized.