The move reflects growing nervousness amongst customers about embarking on long-term relationships with smaller software companies whose cash resources have been drained by the market downturn.
Zurich Insurance, which is part of the Zurich Financial Services Group, has paid the upfront license fee for an application from TIG into an escrow account, with release of the money conditional on completion of a rights issue.
So TIG has launched a 1 for 1 rights issue at 5 pence a share ($0.008) a share, almost half the previous market price, to raise 9.18m pounds ($14.8m). What had troubled Zurich is that Portsmouth UK-based TIG had been hard hit by the slowdown in spending by insurance companies last year and its figures for the year to September 31 showed cash resources of 9.1m pounds ($14.6m) down from 15.3m pounds ($24.6m) a year earlier.
The company said that it will provide further confidence to clients and potential clients in the group’s ability to fulfill contracts and assist in the negotiation of new business currently under discussion.
TIG, which provides software for insurance claims processing, is to supply Zurich with a 1,600-seat system for use in its general insurance business in the UK. As it is likely to have a life of at least five years, Zurich was anxious for assurance that TIG had a secure future.
Zurich insisted there was nothing unusual in its policy. It is not uncommon for payments to be made in escrow, and we considered it to be prudent. That having been said, with the rights issue for TiG completely underwritten, we have no reason to believe their financial future is not as secure as they would like it to be, a company official said.
Source: Computerwire
