ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, August 17, 1996 TAG: 9608190036
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
American investors opposing the $4.7 billion Lloyd's of London restructuring plan are gearing up for what could be their final legal battle before the proposal is voted on this month.
A federal judge in Richmond is scheduled to begin a hearing Monday on whether to block the Lloyd's plan until the insurance market provides additional detailed financial information to U.S. investors.
Virginia was one of the first states to seek legal sanctions against Lloyd's. In April, the State Corporation Commission told the British insurance underwriter to halt collecting payments from its Virginia investors, saying the company violated state securities law by selling unregistered investments and was not licensed to conduct insurance business in the state. The SCC estimated Virginians lost about $2.7 million on Lloyd's investments.
Lloyd's is nervous about the threat posed by the lawsuit. The British government, in a brief filed Aug. 8, said a victory by the investors may ``inflict a fatal blow'' to the plan that is central to the survival of the world's best-known insurance company.
At issue is Lloyd's ``reconstruction and renewal'' plan, aimed at cleaning up enormous losses. For the five years leading up to 1992, Lloyd's of London lost $12.4 billion, although it posted a $1.68 billion profit in 1993.
Many of the company's investors have accused Lloyd's of lying to them about the risks in a market famous for insuring almost anything - from nuclear power plants to rock stars' voices. Some Lloyd's investors have been wiped out because of their liability for huge claims on coverage for asbestos cases and pollution.
Because of these losses, investors distrust the financial documents Lloyd's has distributed in connection with its bailout plan.
``Every estimate they have made, since I started following this on a critical basis, all of their estimates favor them,'' said Page Hufty, a Palm Beach, Fla., investor. ``They cooked the books.''
The plan seeks to cap investors' liabilities prior to 1992 by putting the money-losing insurance policies into a new reinsurance company, called Equitas. To take part in the restructuring, the Lloyd's investors have to pay a premium - as much as $150,000. The worst investors hit may also have to surrender their existing deposits with Lloyd's, but others could receive refunds. Some investors also can reap a substantial tax savings by deducting this special payment for the overhaul plan.
By Aug. 28, Lloyd's investors worldwide have to vote on whether to accept the restructuring plan.
The lawsuit, backed by some 450 U.S. investors, contends Lloyd's restructuring plan violates U.S. securities laws because investors have to buy their way into the Equitas reinsurance company. It asks U.S. District Judge Robert Payne to halt Lloyd's from seeking a vote on the plan until it obeys securities laws, such as providing a proxy statement outlining detailed financial information about the plan and Lloyd's.
Britain and Lloyd's want the Virginia case thrown out.
Lloyd's contends it should not have to register the restructuring plan with the Securities and Exchange Commission because it involves insurance, not the offering of securities.
LENGTH: Medium: 64 linesby CNB