Court Kills Bids to Stop Takeover of Executive Life : Insurance: French investors may finish deal with state within days. Unhappy bondholders can still pursue their case.
Removing what is probably the last obstacle blocking the long-awaited revival of Executive Life Insurance Co., a state appeals court Tuesday rejected two legal bids to thwart French investors seeking to take over the Los Angeles company.
Officials said the ruling by the California Court of Appeal means that Executive Life--which was seized by state regulators two years ago in one of the nation’s biggest insurance failures--could be brought out of conservatorship in a matter of days.
The three-member appeals court panel turned down a bid by two bondholder groups to extend a temporary stay on the Executive Life takeover that was imposed last month by Los Angeles County Superior Court Judge Kurt J. Lewin.
The panel also denied a bid by the dissident groups for an expedited hearing on their legal arguments against the structure of the deal, which they say unfairly discriminates against bondholders and policyholders.
The appeals court, in two one-page rulings, said the petitions were denied “for the absence of facts showing entitlement to extraordinary relief.”
Although the challenges by the bondholder groups are still pending, California Insurance Commissioner John Garamendi suggested that the appeals court is leaning in favor of the takeover deal his office crafted.
“We are very gratified that the court has pushed aside this latest attempt to block our rehabilitation plan and find it very encouraging that such rulings were made by the same appellate court that has monitored the rehabilitation process closely from its outset,” Garamendi said in a news release.
Opponents of the plan still have one last shot at postponing it: They could request a stay from the California Supreme Court, although observers consider it unlikely that the high court would intervene.
Robert Wallan, a lawyer for the bondholders who have been the principal opponents of the plan, said Tuesday that his clients had not yet decided whether to request a stay. They have until the end of today to do so.
But Wallan said the Court of Appeal’s action Tuesday does not damage his clients’ basic case against the rehabilitation plan; it only keeps them from blocking the plan while the arguments are heard. And because the court refused to hear those arguments on an expedited basis, the formal appeal may drag on for a year or more, even after the sale of Executive Life to the French is consummated.
A spokesman for Executive Life’s buyer, Mutuelle Assurance Artisinale de France, said he was “extremely pleased” with Tuesday’s rulings and added that “it’s our intention to close this transaction as quickly as possible.”
Under the deal, which was modified substantially to satisfy previous legal challenges, Mutuelle Assurance would assume about $7 billion in Executive Life assets, pump $300 million into the company and operate it under the name Aurora National Life Insurance Co. The company was taken over by the state in April, 1991, after being crippled by the plummeting value of its vast junk bond holdings and by a surge of worried customers who wanted to cash in their insurance policies.
While Garamendi maintains that 92% of Executive Life policyholders will receive 100% of their policy values, some will be hit hard. Some policyholders, particularly those with policies valued at more than $100,000, fear they will receive less than 60% of their investments’ face values.
For example, a Phoenix couple, Vince and Sue Watson, Tuesday were waiting apprehensively for the outcome of the various court battles.
The Watsons’ 13-year-old daughter, Katie, bedridden and brain-damaged, depends on an Executive Life annuity for therapy.
When the plan goes through, they expect their annuity payments to drop sharply, and they are hoping to complete the sale of their house by that time.
“If the deal went through tomorrow,” Sue Watson said, “we’d have to walk away from the house and give it back to the bank.”
