Bondholders Press for Exec Life Settlement : Insurance: The main opponent to the court-approved deal is being pressured from within to back down.
The main remaining opponent of the rehabilitation plan for failed Executive Life Insurance Co. came under strong pressure from within its own ranks Monday to back off and settle the case.
A group of holders of municipal bonds backed by Executive Life guaranteed investment contracts issued a statement urging their trustees to pursue a settlement.
The trustees--banks representing holders of about $1.63 billion of the so-called muni-GICs--have steadfastly resisted the rehabilitation plan, which a Los Angeles County Superior Court judge approved Friday.
The trustees said they planned to appeal the decision to a state appellate court.
Under the plan, Los Angeles-based Executive Life, which was seized by California insurance regulators in April, 1991, would be taken over by a French group and operated under the name Aurora National Life Insurance Co. The trustees contend that the deal is unfair to the muni-GIC holders.
However, the statement Monday by Soros Fund Management, principal investment adviser to two partnerships with “substantial” muni-GIC holdings, outlined a proposed settlement that it believed would be supported by a majority of the bondholders.
The proposal calls for Aurora to pay the trustees’ legal fees and to agree to buy back the bonds from investors who want to cash in after one year.
Aurora, in a separate statement, confirmed its discussions with the Soros group and said that such a settlement “can be quickly implemented” if the trustees agree.
Soros is a money management firm headed by financier George Soros, considered one of the world’s savviest investors.
Robert Wallan, a lawyer for the trustees, said that “Soros is a name everybody’s going to listen to,” but the trustees still intend to file their appeal by Friday’s deadline.
Wallan added that there are “practical impediments to a settlement,” noting that a settlement deal struck by a smaller muni-GIC group whose trustee was Texas Commerce Bank was voted down by the bondholders.
