In an apparent scramble to buy some time to cover its debt obligations, Bermuda insurer Trenwick has entered into a forbearance agreement with its letter of credit providers.

The troubled company made the announcement as its stock continued to nosedive on the New York Stock Exchange yesterday, reaching yet another 52-week low yesterday of 43 cents.

The company's shares fell 22.8 percent in trading yesterday, closing at 44 cents. Yesterday's drop followed drastic dips in the company's stock value over the last week and especially after investors reacted on Friday to word that the company had posted a nearly $140 million net loss.

The company has also suffered numerous credit rating downgrades in recent weeks, analysts questions about its ability to continue as an ongoing concern and was yesterday delisted from the S&P 500 Index.

In a press statement this week company management recognised that Trenwick had "experienced significant trading volume and price declines in its publicly listed securities."

Fighting to keep its head above water, Trenwick said it would continue to "engage in discussions with its current letter of credit providers regarding the renewal for an additional year of its $226 million letter of credit facility in support of its Lloyds' operations. In addition, at this time and as previously announced, Trenwick continues to review its loss reserves with external actuaries".

Yesterday the company announced that it was able to broker some time with a forbearance agreement that has its letter of credit providers agreeing to "refrain from enforcing their rights or remedies under the credit agreement until November 22, 2002, or earlier if there is another default under the credit facility or the forbearance agreement, a third party exercises any right of action against Trenwick for a debt in excess of $5 million or other material obligation or Trenwick takes an action which the letter of credit providers reasonably consider to be materially adverse to their interests".

But Trenwick clients might not be so happy with the arrangement as the company agreed to hold off on payments and distributions: "In consideration for the forbearance of the letter of credit providers, Trenwick agreed, among other things, to refrain from making certain payments or distributions, and to facilitate a meeting of the letter of credit providers and Lloyd's."

Trenwick management have also previously disclosed that they may be forced to seek protection from creditors.

Meanwhile, rating agency Standard & Poors warned this week that if the banks elect on November 22 not to renew the letter of credit, or to demand cash collateral, there could be "substantial doubt as to Trenwick's ability to continue underwriting at Lloyds or continue as an ongoing concern".

Beyond the losses and rating downgrades, the company was also delisted recently from the Bermuda Stock Exchange (BSX) and ceased to write US Specialty business after a recent deal struck with Chubb Re.

Earlier in the year the company also effected a 100 percent quota share reinsurance agreement with new Bermuda insurer Endurance, on in-force business from its property catastrophe subsidiary LaSalle.