The proposed sale of Executive Life Insurance Co. to a French investor group was approved yesterday by the California court overseeing the life insurance company's rehabilitation.

The court decision takes the saga of Executive Life another step closer to resolution, but it has no impact on the California Insurance Commissioner's appeal to disenfranchise municipal bondholders. The fate of $1.93 billion of bonds backed by the bankrupt life insurer's guaranteed investment contracts will be decided by the state's Second District Court of Appeals.

The winning bid in the Executive Life auction was $3.25 billion from Altus Finance -- a subsidiary of Credit Lyonnais -- and Mutuelle Assurance des Artisanale de France. If the claims from municipal bondholders are upheld, the bid will result in policyholders getting about 72 cents for every dollar invested: if Commissioner John Garamendi wins and the municipal interests receive nothing, policyholders will get about 89 cents on the dollar.

Counsel representing trustee banks, which successfully sued the commissioner for equal rights to Executive Life's assets, have been very confident about the merits of the municipal bondholders' claims. Earlier this month, lawyers said the appeal will not present a problem. Trustee attorneys were not available late yesterday.

On the other hand, Mr. Garamendi's counsel -- Carl Rubeinstein of Rubenstein & Perry -- was so convinced that the original finding in favor of the GIC-backed bonds was erroneous that he appealed to the California Supreme Court, before being denied and sent to the appeals court.

The same magistrate who ruled in favor of the bondholders -- Superior Court Judge Kurt Lewin -- approved the insurer's sale to the French group.

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