LOS ANGELES - The hearing on a modified rehabilitation plan for Executive Life Insurance Co. opened yesterday morning with testimony from policyholders, who generally expressed a need for the court to move fast on the plan.
Late yesterday, an announcement was expected in court of a settlement with California municipal-GIC holders, according to a spokesman for Aurora National Life Insurance Co.
The agreement, expected to relate to about $50 million of California municipal bonds backed by Executive Life guaranteed investment contracts, would still leave the bulk of municipal holders, about $1.05 billion, in opposition to the rehabilitation plan.
One source said the settlement involved bonds issued by Whittier, Simi Valley, and Temecula Unified School District in California, as well as bonds from the Housing and Redevelopment Authority of St. Paul, Minn.
The settlement with the California holders is similar to that reached with trustee Texas Commerce Bank-El Paso, the Aurora spokesman said.
As part of the settlement, those bondholders are expected to receive about $2 million as partial payment of legal fees, said a source familiar with the transaction. Further information on additional payments was not available. Lawyers representing the California muni bond holders could not be reached for comment.
During the hearing on the rehabilitation plan, Los Angeles County Superior Court Judge Kurt Lewin asked policyholders, who generally own either life insurance or annuity products, to "limit your comments as best you can."
Warning against "preaching to the choir," the judge said that the court was persuaded of the need to move forward on the plan and did not need to hear extensive testimony in its support.
A score of policyholders testified for about 90 minutes on various topics. Some of them stressed hardship problems caused by having funds frozen, others simply urged the judge to be expeditious and fair in getting a plan approved, and some voiced a series of complaints about rising legal fees, the plan's complexity, and other matters.
A state appellate court in March set aside an initial rehabilitation plan that had been approved by Lewin. Garamendi's modified plan is designed to address the higher court's concerns, including revising the treatment of municipal bonds backed by Executive Life guaranteed investment contracts.
Lewin repeated yesterday that he believes the rehabilitation plan continues to offer "greater benefits" than a liquidation of the company. Lewin noted. that some people have suggested that liquidation would produce better results, but "I haven't been persuaded of that."
The rehabilitation plan calls for having a French investment group, led by Altus Finance Co., take over Executive Life and operate it with Aurora as the successor company.
On Monday, a bank trustee for $200 million of El Paso Housing Finance Corp. multifamily housing taxable bonds, Series 1986A, reached a settlement of its claims against the failed insurer as part of a plan that includes obtaining partial back interest payments.
Trustees for the remaining $1.65 billion of taxable municipal bonds backed by the GICS have not yet indicated whether they might agree to similar settlements.