Saturday, November 21, 2009

ONGOING COVERAGE: METROPOLITAN MORTGAGE BANKRUPTCY

Court approves sale of Met affiliate

Deal worth $55 million; investors' share unclear

John Stucke
Staff writer
May 3, 2008

A $55 million deal to sell a Metropolitan Mortgage & Securities Co. insurance affiliate received court approval Friday.

It remains unknown how much cash from the sale of Western United Holding Co. may ultimately flow to the thousands of investors who held notes when Metropolitan Mortgage went bankrupt.

The final price is about $4 million more than that first brokered by Washington Insurance Commissioner Mike Kreidler last month. The agreement includes $7 million in cash, an estimated $15 million in real estate that must be sold, another $2 million in cash that will be paid when the buyer sells a specific piece of real estate, and a $31 million reinsurance claim of affiliated company Old Standard Life, according to Stephanie Marquis, spokeswoman for the insurance commissioner's office.

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Kreidler said the higher price is a demonstration of goodwill from buyer Global Life Holdings LLC.

But there are obligations attached to the cash before any proceeds are returned to creditors. And the value of the real estate included in the deal may be worth less in the current market than the accounting value attached to the parcels.

Metropolitan trustee Maggie Lyons signed off on the deal this week, but she declined to comment on the agreement Friday.

Kreidler's office put Western United under receivership in the wake of Metropolitan's 2004 bankruptcy. The office overhauled much of the insurer's investment portfolio after determining that many of the firm's assets were inappropriate for a state-regulated insurance company.

Western United remained solvent throughout the four-year receivership, though Kreidler's office drew sharp criticism for its handling of the firm.

The sale, first announced last month, surprised the team of legal, accounting and business experts employed by the trust. They are mandated to recover as much money as possible for Metropolitan's creditors and were angered that Kreidler's team negotiated the insurance company sale in secret.

Western is regarded as the single largest asset of Metropolitan and thus one of the best hopes of a sizable cash return to investors.

Under the deal, Global Life told Kreidler it plans to expand Western United's business in Spokane.