Fund American Enterprises Holdings Ltd. has received regulatory approval to complete the second phase of its investment in Financial Security Assurance Holdings Ltd., FSA and U S West Inc. said Friday.

U S West, is the majority parent of Financial Security Assurance Holdings, the holding company for Financial Security Assurance Inc., the financial guaranty insurer.

During FSA's initial public offering last May, Fund American purchased two million common shares and retained the rights to purchase additional securities to increase its holdings in the firm.

With the completion of the second phase, which was announced Friday, Fund American increased its voting rights in FSA to 20.9%, and its investment in the insurer now totals $90.7 million. Fund American would increase its ownership of FSA to more than 50% if it were to exercise all its "options, rights, and warrants," a press release said.

For now, U S West retains 60.5% ownership of FSA, Fund American owns 7.6%, Tokio Marine and Fire Insurance Co. Ltd., 7.4%, and public shareholders and FSA employees, 24.5%.

In the second part of the transaction, Fund American purchased 50,000 shares of new 7% Series B cumulative redeemable preferred stock issued by U S West for $50 million. The transaction also gives Fund American the option to purchase up to 2.56 million additional shares of FSA common stock from U S West.

In addition, Fund American purChased two million shares of non-dividend paying, voting, 10-year Series A convertible redeemable preferred stock for $700,000 from FSA, the press release said. Fund American can purchase two million shares of FSA common stock at $29.65 per share by converting the Series A shares.

"We're pleased to have completed our initial investment in FSA as planned," said Jack Byrne, chairman of Fund American and FSA's board of directors. "We have been working closely with FSA management and feel positive about the company. Our balance sheet is strong, and we see good prospects.

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