One of the projects financed by Mutual Benefit Life Insurance Co.-backed municipal issues is 100% owned by Mutual Benefit itself, and the outlook for bondholders trying to get their money out of the development is exceedingly dim, according to analysts.

The Cobb County, Ga., Development Authority's $9.7 million Series 1985 issue was used to finance the Overlook Inn project in Vinings, Ga. Originally, the partnership that built the complex included both Mutual Benefit and Trammell Crow Co.

But Trammell Crow sold its stake in the hotel and convention center, according to Jim Potts, a partner with the nationwide real estate developer.

"They redeemed our interest" in the project, Mr. Potts said.

Redemption, however, is exactly what Bondholders are afraid of. The Cobb County bonds are among at least 22 issues that are scheduled for redemption if a guarantor cannot be found for the issue. Redemption, in turn, means bondholders would have to foreclose on the property, and essentially sell the projects for salvage. Several analysts said such asset sales could result in significant investment losses.

Bondholders and Mutual Benefit have until Sept. 12 to locate backing, according to Kevin Kirby, vice president at Citizens and Southern National Bank. If no insurer is found, the bonds would be redeemed no later than Nov. 10, or 60 days later, Mr. Kirby said.

The devastating aspect of the Cobb county development -- a hotel and convention center originally called the Overlook Inn -- is that the assets are now tied up in the New Jersey Insurance Department's custodianship.

Jim Berzok, a spokesman for the insurance department, said it is impossible at this early stage to determine how such an asset would be disposed of, but he suggested that a foreclosure by bondholders would be treated as a claim by creditors. As such, it could take a back seat to life insurance policies and annuitants.

"We're focusing on bigger things first," Mr. Berzok said, "before getting into some of the more minor financial arrangements," such as bondholder's claims.

Calls to Mutual Life to determine why the insurer purchased the entire Overlook Vinings partnership were not returned Friday.

Mutual Benefit was placed in custodianship earlier this month by the insurance department, after a hemorrhaging investment portfolio inspired a swarm of policy redemptions and annuities. Insurance Commissioner Samuel F. Fortunato immediately ceased policy surrenders and later declared a freeze on put bond redemptions.

The only event that would interrupt the mandatory redemption, and thus a bondholder attempt to foreclose, would be if the project could obtain a guarantee from an alternate source.

That Mutual Benefit owns the project, however, again throws a monkey wrench into the works: Banks or insurers weighing a guarantee for this particular deal would be unlikely to guarantee a property of a failed company, according to several analysts.

Every one of the 59 Mutual benefit-insured tax-exempts could be headed for redemption due to the seizure of the life insurer, according to Abraham Losice, vice president at Standard & Poor's Corp.

"It's pretty common to have an event of default or redemption due to the failure of the credit enhancement," Mr. Losice said. "At the very least, it would be a subset of the payment defaults through the puts."

Three trustees contacted Friday said all of the Mutual Benefit-backed issues has prepayment provisions that set timetables for mandatory redemption. Bruce Daiger, vice president in the corporate trust department of Sun Bank, said all eight of the deals for which the bank is trustee have such language.

"Chances are that we have to accelerate the bonds," Mr. Daiger said.

A bank official at Texas Commerce Bank said all five of its issues contained pertinent prepayment clauses. Sending notices of redemption is "something the attorneys have been working on," the official said. "The parties are aware of the provisions for prepayment of the bonds in the event they cannot secure an alternate guarantor."

Citizens and southern National Bank is the trustee for nine Mutual Benefit deals, including the Cobb County issue.

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