Reliance Bond Bid Pits Icahn and Steinberg

In a dispute pitting two of Wall Street’s high-profile titans against each other, billionaire financier Carl Icahn is bidding for bonds of troubled insurer Reliance Group Holdings Inc., which is controlled by former corporate raider Saul Steinberg.

The tender offer by Icahn affiliate High River is intended to block a bankruptcy restructuring that Reliance is planning, according to people familiar with the matter, and which High River considers unacceptable. Steinberg’s family has run 183-year-old Reliance since 1968.

High River, which owns about $50 million of Reliance’s $291.7 million of 9% senior notes, offered to buy up to $40 million more for 17 cents on the dollar. It has said the notes have traded this month at 6 to 8 cents on the dollar.

Icahn scaled back the offer from an earlier plan to buy about $61 million of the notes. The notes were to mature Nov. 15, but Reliance failed to make the principal payment.

Reliance, a property-casualty insurer, has urged bondholders not to act immediately upon Icahn’s offer.

Reliance stopped writing new policies earlier this year. The company also failed last month to make an interest payment on a separate issue of $171.8 million of 9.75% senior subordinated notes maturing in 2003.

The New York Stock Exchange said Dec. 5 it was suspending trading in Reliance shares and would move to delist them. They last traded at 3 cents.