PMI Group stipulation approved by court overseeing unit's receivership

By Caroline Salls

Pittsburgh, Dec. 17 - The PMI Group, Inc. received approval from the Superior Court of the State of Arizona in and for the County of Maricopa for a stipulation of settlement with its official committee of unsecured creditors, subsidiary PMI Mortgage Insurance Co. and PMI Mortgage Insurance's receiver and special deputy receiver, according to an 8-K filed Monday with the Securities and Exchange Commission.

As previously reported the settlement was approved by the U.S. Bankruptcy Court for the District of Delaware on Dec. 13.

The Arizona court is overseeing PMI Mortgage Insurance's receivership proceedings.

Settlement details

The terms of the stipulation include the following:

• PMI Mortgage Insurance will pay PMI Group $20 million for the exclusive use of $1 billion of net operating loss carryforwards and PMI Group will have the exclusive use of the remaining $1.2 billion,

• PMI Mortgage Insurance will have the right to direct the use of any of its net operating losses for any taxable period ending after Jan. 1, 2012;

• PMI Group and PMI Mortgage Insurance will remain consolidated in a tax group;

• PMI Group will waive and transfer its entitlement to distribution on a $1.88 million claim in the liquidation of Reliance Insurance Co. in favor of PMI Mortgage Insurance;

• PMI Mortgage Insurance will waive and transfer any recovery from a $2.5 million claim related to the 2008 sale of its Australian operations to QBE Holdings (AAP) Pty Ltd. in favor of PMI Group; and

• The parties will provide a mutual claims release and waiver.

The stipulation also accounts for payments and fees associated with the PMI Group's voluntarily termination of its pension plan. The termination is currently underway.

The company said the underfunding of this plan upon termination is expected to require a payment to the plan of about $15 million to $20 million. Under the stipulation, PMI Group will pay specified administrative fees and costs associated with the standard termination and PMI Mortgage Insurance will pay the funding shortfall.

Finally, the reinsurance subsidiaries to which PMI Mortgage Insurance has ceded risk are to enter into commutation agreements under which all ceded risk will be commuted and outstanding intercompany amounts will be settled.

PMI said the commutation agreements require that the reinsurance subsidiaries make a total of $47.4 million of payments to PMI Mortgage Insurance and some of its subsidiaries;

PMI is a Walnut Creek, Calif.-based provider of residential mortgage insurance and credit enhancement products. The company filed for bankruptcy on Nov. 23, 2011. Its Chapter 11 case number is 11-13730.

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