The three-year-old saga of Mutual Benefit Life Insurance Co. may come to an end by September for some holders of about $200 million of municipal bonds backed by the failed company.

Advisers to trustees for the bonds say an agreement was reached in April to restructure 12 of the issues under an arrangement that will give investors the opportunity to either sell all or a portion of their securities, or exchange them for restructured bonds.

Emax Advisors, the financial adviser to eight bond trustees for 14 of the projects guaranteed by the insurance company, is soliciting bids from investment groups, including underwriters, seeking "innovative ideas" on how to restructure the bond deals, according to Kirk Michael, a principal with Emax Advisors.

Agreements on how to restructure the other two projects are expected to be completed soon, said Jacqueline P. Shanes, a lawyer with McCarter & English, counsel to the trustee group.

Bids for 12 of the 14 issues are due June 16, but the deadline may be extended until the middle of July, said Audrey McGuire, another Emax principal.

Once bids have been received, Emax will evaluate them and recommend a restructuring method to bondholders, who will be able to vote on it in September. The agreement must be unanimously approved by all the bondholders of each issue. If it is not, the court will determine the restructuring process.

In addition, the restructuring method must be approved by the issuers, the New Jersey insurance commissioner, and the rehabilitation court, the Superior Court of New Jersey, Chancery Division -- Mercer County.

For the most part, since Mutual Benefit was seized by New Jersey insurance regulators in July 1991, the bonds have been trading as defaulted securities.

In April, Mutual Benefit said that it reached "separate but substantially similar" modification agreements with the trustees of 12 tax-exempt industrial development bond issues on which it is the guarantor. The underlying multifamily apartment complexes are owned by limited partnerships that are partly owned by an indirect subsidiary of the insurance company.

The agreements establish a framework that bidders must use when submitting their restructuring ideas. Under the framework, the principal amount of the obligations underlying the bonds has been listed at an approximate fair market value of each project. New bonds will be issued to refund the outstanding securities. The restructured bonds will bear a combination of a fixed base rate of interest and a contingent rate of interest payable only from each project's net operating income. In addition, McGuire said, the maturity of the bonds will be extended to about 25 to 30 years; most of the bonds were originally set to mature in 2002 or 2003.

The restructured bonds will not be guaranteed by Mutual Benefit.

Nine of the 12 deals are expected to be restructured through a prepackaged bankruptcy option, Shanes said. This is because the bonds are so widely held it would be difficult to get each bondholder to vote on the restructuring, she said.

Under the bankruptcy process, a bondholder committee will choose a restructuring option. Once the option is approved by bondholders representing a certain percentage of the outstanding bonds, the court must approve the package, Shanes said.

For closely held bond deals with 10 or fewer large institutional owners, bondholders could receive restructured bonds within four to five months, Shanes said. On the widely held issues, bondholders could receive restructured bonds in about nine to 10 months, Shanes said.

Initially when the insurer filed its rehabilitation plan with the New Jersey courts, Mutual Benefit identified municipal bondholders as unsecured creditors, who were not expected to receive any money from the company. In addition, the insurer said that it would not honor guarantees on the tax-exempt bonds it insured.

However, under an amended rehabilitation plan approved by the rehabilitation court last August, municipal bondholders are secured creditors. This entitles them to receive a secured claim equal to the "allowed" fair market value of the underlying project and a deficiency claim for the portion of the secured claim that exceeds the fair market value of the underlying project.

The modification agreements are designed to settle the secured claim and establish the principal amount of the deficiency claim. The deficiency claim is expected to be resolved by the rehabilitation court and could result in bondholders receiving stock in the successor company to Mutual Benefit, known as MBL Life Assurance Corp.

Mutual Benefit was seized by insurance regulators after problems in the real estate market eroded its investment portfolio.

Mutual Benefit-backed bonds were issued by state and local governments largely to finance real estate developments, many of which are government assisted housing projects.

The insurer was guarantor of 44 municipal bond issues with an original face value of approximately $615 million. Agreements have been reached on methods of settlement for 35 of the issues, totaling $486 million, including 12 of the 14 deals for which Emax is the adviser, Mutual Benefit said. The other nine issues valued at approximately $129 million, are "all in fruitful discussion," a Mutual Benefit spokeswoman said.

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