LaSalle Re liability assumption proposal could prompt liquidator appointment, preferred distribution

By Caroline Salls

Pittsburgh, Dec. 13 - LaSalle Re Holdings Ltd. may be able to appoint a permanent liquidator in January and begin distributions to its series A preferred shareholders in the second quarter of 2008 if a proposed liability assumption transaction in connection with LaSalle's Lloyd's of London operations is completed, according to an 8-K filed with the Securities and Exchange Commission.

Under the proposed transaction, Canopius Group. Ltd. would assume the liabilities of Syndicate 839.

According to the filing, 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.

The capital for Syndicate 839 was provided by Lloyd's capital vehicles Oak Dedicated Ltd., Oak Dedicated Two Ltd., Oak Dedicated Three Ltd., Oak Dedicated Four Ltd. and Packchance Ltd., and LaSalle, through its LaSalle UK Holdings Ltd. subsidiary, holds 100% of the beneficial ownership in the Oaks.

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 have accepted Canopius Group's proposal to assume Syndicate 839's liabilities via a RITC.

According to the 8-K, the Oaks' underwriting exposure to the syndicate will be crystallized under the Canopius transaction, and there will be no draw on the letters of credit.

Therefore, the letters of credit will be canceled and any contingent liability that LaSalle has to the letter-of-credit banks will cease.

The transaction is subject to acceptance of a series of linked offers made to several entities with an interest in the Oaks and LaSalle UK.

The transaction is also subject to approval by the Supreme Court of Bermuda and Corporation of Lloyd's.

In addition, an objection submitted by several LaSalle shareholders to the appointment of a permanent liquidator will be withdrawn in connection with the Canopius transaction, allowing the company to appoint a permanent liquidator by the end of January.

After a permanent liquidator is appointed, LaSalle said it expects to be able to make an initial distribution to its series A preferred shareholders by the end of May.

LaSalle's joint provisional liquidators have estimated that series A shareholders will be entitled to a $9 to $10 liquidation dividend per share.

In addition, under LaSalle's constitution, the series A preferred shareholders are entitled to a $25 preference dividend per share, plus interest that must be paid to preferred shareholders in liquidation before other shareholders.

LaSalle's common shareholder Trenwick Group Ltd. is unlikely to receive any distribution under the company's liquidation, the 8-K said.

LaSalle Re, a Bermuda-based reinsurance company, filed for Section 304 bankruptcy protection in 2004 in connection with its Bermuda proceedings. The Bermuda court placed the company in liquidation on April 15, 2005.

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