ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, August 31, 1996 TAG: 9609030035
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
DATELINE: LONDON
SOURCE: DIRK BEVERIDGE ASSOCIATED PRESS
EXECUTIVES PERSUADED enough money-losing investors to come aboard a complicated and controversial deal crucial for the company's survival.
Just as its most famous liability, the Titanic, was sinking back into the sea, Lloyd's of London announced Friday it had managed to stay afloat.
Earlier in the week, the opposite seemed possible.
But Lloyd's executives persuaded enough money-losing investors to come aboard a complicated and controversial rescue package crucial for the survival of the 308-year-old insurance broker.
``We are now progressively turning our attention to the future,'' chief executive Ronald Sandler told a news conference after Lloyd's said its restructuring plan would proceed. More than 91 percent of the investors approved, though there are still hundreds of dissidents.
For months, Lloyd's has been trying to erase the problems of a past that Chairman David Rowland said ``we should never forget.''
Lloyd's is famous for taking on huge risks, such as covering the ``unsinkable'' Titanic, which cost underwriters more than $1 million when it sank in 1912. A portion of the ship sank to the ocean floor for a second time Friday as a salvage attempt failed.
Lloyd's hit hard times in the late 1980s, when claims for asbestos, pollution and hurricanes - as well as modern maritime disasters such as the Exxon Valdez oil spill - produced $12.4 billion in losses for the five years ended in 1992.
This spelled big trouble for Lloyd's investors. Throughout the company's three centuries of business they had been required to put up their entire fortunes as collateral to underwrite insurance policies at Lloyd's.
When disaster struck, many refused to pay, saying they were cheated by Lloyd's insiders. Others went broke. Some killed themselves. Lloyd's Virginia investors lost an estimated $2.7 million, the Virginia State Corporation Commission said.
Lloyd's was left with a mess on its hands as hundreds of the nonpaying investors went to court.
Lloyd's sought a solution by offering the 34,000 investors a 3.1 billion pound - $4.8 billion at current exchange rates - package that would cut their losses in return for their agreement to end all litigation.
If the plan had failed, Lloyd's said it would have become insolvent. The company was fortunate this week in successfully appealing a U.S. court ruling that could have wrecked the plan.
After receiving overwhelming acceptance from the investors, Lloyd's said early Friday that it would extend the deadline for the stragglers until noon on Sept. 11.
The old Lloyd's liabilities are to be placed into a new group, Equitas, which is intended to separate Lloyd's troubled past from its more promising present. The market returned to profitability in 1993, the most recent year for which the books are settled, with earnings of $1.67 billion. Lloyd's delays settling accounts for a year to give time for claims for losses to be presented and processed.
Lloyd's faces two additional steps before the restructuring is complete:
Approval of the plan by the board of Equitas, which must be satisfied that Lloyd's has arranged adequate financing to handle all the old claims.
Approval from Britain's Department of Trade and Industry, which requires Lloyd's to show every year it is solvent. Lloyd's has said that if the restructuring plan failed, it would be insolvent by the end of the month.
Lloyd's hopes to complete these steps quickly, perhaps as soon as next week.
Lloyd's said Friday that in the United States, more than 30 percent of the investors had not signed onto the reconstruction plan. There are about 3,000 U.S. investors, but not all are actively involved in the insurance market.
Sandler was unable to say how much money these U.S. investors owe, but he downplayed the significance of any legal action they might come up with.
``We are not overly concerned,'' Sandler said.
LENGTH: Medium: 79 lines ILLUSTRATION: PHOTO: AP. David Rowland, chairman of Lloyd's of London, tellsby CNBa press conference in London on Friday that he was close to solving
its restructuring.