LaSalle Re Lloyd's operations settlement approved; company to be placed in liquidation by end of March

By Caroline Salls

Pittsburgh, Feb. 27 - LaSalle Re Holdings Ltd. received court approval of a settlement connected to the proposed sale of its Lloyd's of London operations that should allow the company to begin making scheme of arrangement distributions to its series A preferred shareholders by the end of the second quarter, according to an 8-K filed with the Securities and Exchange Commission.

The company also said it expects to be placed into members' voluntary liquidation by the end of March after its scheme of arrangement was terminated on Jan. 22.

LaSalle said its liquidator is expected to make a distribution of its net assets to the company by the end of May once all of its non-reinsurance creditors have been paid in full.

As previously reported, Canopius Group. Ltd. has agreed to assume the liabilities of Syndicate 839.

LaSalle is a joint guarantor of roughly $58 million of series 3 letters of credit issued by a group of banks that provide funds at Lloyd's to support the underwriting for Syndicate 839.

Under the letter-of-credit agreements, LaSalle would be liable to reimburse the banks if a draw was made on the letters of credit.

As a result, LaSalle's stakeholders and joint provisional liquidators accepted Canopius Group's proposal to assume Syndicate 839's liabilities via a reinsurance-to-close agreement.

Under the settlement, the letter-of-credit banks' contingent claims will be cancelled and all pending lawsuits will be resolved.

An objection submitted by several LaSalle shareholders to the appointment of a permanent liquidator will also be withdrawn in connection with the Canopius transaction, allowing the company's joint provisional liquidators to apply for permanent liquidator status.

Once they are appointed as permanent liquidators, and following the distribution of LaSalle's net assets, the permanent liquidators will pay the company's obligations and distribute the surplus assets to its series A preferred shareholders, the filing said.

According to the 8-K, LaSalle's series A preferred shareholders are entitled to receive a $25-per-share preference dividend in a liquidation and payment of accrued dividends in a liquidation before payments are made to other shareholders.

Specifically, LaSalle said the liquidators estimate that the series A preferred shareholders will receive a liquidation dividend of between $10 and $11 per preferred share.

The initial preferred surplus asset distribution is expected to be made to series A preferred shareholders by the end of the second quarter.

Following completion of the scheme of arrangement, LaSalle said the amount of its shareholder surplus is $38.3 million, before payment of expected liquidation fees and expenses.

LaSalle Re, a Bermuda-based reinsurance company, filed for Section 304 bankruptcy protection in 2004 in connection with its Bermuda liquidation proceedings.

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