Company: KG
Filing Date: 2025-08-15
Form Type: 10-Q
Source: 0002055116-25-000018
Chunk: 160

Company: Kestrel Group Ltd
Filing Date: 2025-08-15
Form: 10-Q
Item: Item 1A
Chunk 160
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estrel Group or its subsidiaries, and Kestrel Group’s or its subsidiaries’ future cash flows could be adversely affected.

To preserve Kestrel Group’s and its subsidiaries’ ability to utilize their tax attributes without limitation, Kestrel Group has taken actions to attempt to prevent an “ownership change” from occurring, including adopting provisions that limit or discourage shareholders from acquiring 5% or more of Kestrel Group or, in the case of shareholders that already own 5% or more of Bermuda NewCo, from increasing their ownership. Kestrel Group may take further actions in the future. There can be no assurances that such actions will be available, or if such actions are available, whether Kestrel Group will decide to undertake any such actions. Moreover, there can be no assurances that any existing or future actions will be effective in preventing an “ownership change” pursuant to Section 382 of the Code.

Kestrel Group is a tax resident of, and subject to tax in, both the United States and Bermuda, which may result in an increase in Kestrel Group’s and its subsidiaries’ cash tax obligations and effective rate.

Under current U.S. federal tax law, a corporation organized under Bermuda law is generally classified as a foreign corporation pursuant to Section 7701(a)(4) of the Code. Section 7874 of the Code and the Treasury Regulations promulgated thereunder, however, contain rules that cause a foreign corporation, such as Kestrel Group, that acquires the stock of a domestic corporation, such as US NewCo, to be treated as a domestic corporation for U.S. federal tax purposes in certain situations. Kestrel Group expects to be treated as a domestic corporation for all US. Federal tax purposes upon consummation of the Second Merger pursuant to Section 7874(b) of the Code. However, Section 7874 of the Code is complex and Kestrel Group cannot be certain or provide any guarantees regarding its expected treatment.

On the basis that Kestrel Group is treated as a tax resident in the U.S., Kestrel Group is not expected to be treated as a Bermuda tax resident pursuant to Bermuda’s tax legislation. Regardless of whether Kestrel Group expects to be treated as a domestic corporation for U.S. federal income tax purposes pursuant to Section 7874(b) of the Code, it could be liable for both U.S. and Bermuda taxes. Kestrel Group does not expect any tax owed to Bermuda to be material, but Bermuda’s tax