Unlocking Value in Run-Off:
The Benefits of Rhode Island’s
Unlocking Value in Run-Off:
The Benefits of Rhode Island’s Restructuring Act
In the wake of the Providence County Superior Court’s April 25th decision in the GTE REinsurance Company Limited case, solvent corporate captives, stand-alone run-off businesses and insurance and reinsurance companies with a U.S. run-off portfolio are undoubtedly considering the unique opportunities afforded by Rhode Island’s Restructuring Act. Given the Court’s endorsement of commutation plans, including upholding the Act’s constitutionality, these entities can now focus on how to extinguish liabilities for past and future claims outside an insolvency proceeding, including the benefits associated with redomesticating to Rhode Island.
Rhode Island is the only state in the U.S. that allows a solvent insurer to liquidate its obligations in run-off. In light of the GTE REinsurance decision and the unique benefits provided by the Act, the Insurance Division of Rhode Island’s Department of Business Regulation (the “DBR”) expects an increase in inquiries regarding the commutation plan process. As a means of aiding interested parties, below are some general points to consider:
1. Statutory Basis. Rhode Island’s Insurance Statutes and Regulations (Title 27, Chapter 14.5, and Insurance Regulation 68) set forth the procedure by which commercial insurers and reinsurers in run-off, or no longer writing new business, may honor creditors’ claims, liquidate future exposure to those claims and terminate operations. The statute applies to any commercial insurance or reinsurance company that is domiciled in Rhode Island, including companies that redomesticate to Rhode Island.
2. Role of the DBR. The DBR’s responsibility is to review and comment on the proposed commutation plan of the insurer or reinsurer and to determine that it is consistent with the state statute governing Voluntary Restructuring of Solvent Insurers and its enabling regulations. The DBR’s approval is necessary before the proposed plan can be presented to the Superior Court.
3. Impact of the GTE REinsurance Decision. Pursuant to the Act, GTE REinsurance Company Limited (“GTE RE”), a solvent reinsurer based in Providence, R.I., submitted to the DBR a proposed Commutation Plan designed to pay policyholders the value of the policies now and extinguish any future claims. The DBR, with the assistance of its counsel Morrison & Foerster LLP, evaluated the plan for compliance with the statutory and regulatory standards. After the DBR concluded its review and approved the plan,
The DBR, represented by Morrison & Foerster, participated in the defense of the statute’s
constitutionality. As noted by Joseph Torti III, Deputy Director and Superintendent of Insurance for the DBR, “The Court recognized that the exhaustive review and analysis of the Plan by the DBR provides important safeguards to protect the interests of all policyholders. We are pleased that the Court sustained the constitutionality of this innovative law and are committed to exercising a meaningful role in overseeing this and future commutations.”
Rhode Island is proud to serve as a beacon for solvent insurers and reinsurers seeking to discharge liabilities and financial obligations in a strategic, streamlined, and time-tested fashion, all the while protecting policyholders from the problems presented by unsupervised run-offs of solvent companies. To that end, the DBR and Morrison & Foerster LLP look forward to assisting entities as they consider the benefits of the Act and explore how to unlock value in run-off. Should you be interested in discussing any such opportunity, please contact:
Joseph Torti III Office: 401-462-9620 [email protected] or Gary Lee Office: 212.468.8042 [email protected]
About the State of Rhode Island Department of Business Regulation
The Department’s primary function is the implementation of state laws mandating the regulation and licensing of designated businesses, professions, occupations and other specified activities. The industries regulated include insurance, banking, securities, liquor, real estate, racing and athletics, among others. For more information please visit: http://www.dbr.ri.gov
About Morrison & Foerster
Morrison & Foerster is a global firm with over 1,000 lawyers in key technology and financial centers in the U.S., Europe and Asia. Our attorneys share high standards and a commitment to excellence. Our dedication to serving client needs has resulted in enduring relationships and a record of high achievement.
Attorney Biography
Gary Lee is co-chair of the firm’s Bankruptcy & Restructuring Practice Group. He advises clients on
domestic and international restructuring and insolvency matters in the U.S., UK, and continental Europe. He is currently involved as counsel to one of the three Icelandic banks that are in restructuring proceedings in Iceland. Mr. Lee currently is involved in representing several hedge funds in restructuring and liquidation proceedings including several matters in the Madoff SIPA proceedings.
Mr. Lee has been heavily involved in the implementation of foreign liquidations and schemes of arrangement in the U.S. and has been closely involved with issues arising under Chapter 15 of the U.S. Bankruptcy Code. Mr. Lee also recently acted as debtor’s counsel to one of the largest mortgage banks in the United States, whose liquidating Chapter 11 plan was confirmed in Delaware. Mr. Lee has acted as counsel to the acquirer — in and out of Chapter 11 — in several major asset purchases of mining, smelting, and oil and gas
operations. Mr. Lee has been involved in several European restructuring matters, including the operations of Global Crossing, Ish, Viatel, Star Telecom, and others.
Mr. Lee is a fellow of the American Bar Association, and previously served as the vice chairman of its Litigation Committee of the Young Lawyers Division. He is the co-chair of the Transnational Bankruptcy Committee of the International Insolvency Institute. Additionally, he is a member of the City Bar’s Insurance Law Committee, and is the former co-chair of its Insolvency Committee. He also served on the International Insolvency Committee of the American Bankruptcy Institute. Mr. Lee is a co-author of the “United States of America,” chapter of the book International Asset Tracing in Insolvency, Oxford University Press, 2010. He was cited in Euromoney’s Guide to the World’s Leading Lawyers.
Representative Matters
• Ambac Financial Group, Inc. Counsel for the official committee of unsecured creditors, in one of the largest Chapter 11 cases filed in 2010 currently pending in the Southern District of New York.
• The Resolution Committee of Landsbanki Islands hf., one of the largest banks in Iceland. The firm is advising the bank on issues related to securities matters, restructuring of assets, cross-border conflicts of law, and litigation matters as well as providing advice related to the global settlement of claims. In addition, the firm has been working with the Icelandic banks to harmonize their winding-up procedures with those of the United States, the European Union, and Canada.
Gary S. Lee
Partner
1290 Avenue of the Americas New York, NY 10104-0050 (212) 468-8042
Attorney Biography
• State of Rhode Islands’s Department of Business Regulation. Lead lawyer representing the insurance division of the State of Rhode Island’s Department of Business Regulation in the first-ever proposed discharge and liquidations of the obligations of a solvent insurer in the U.S.
• Sumitomo Corporation. We represented Sumitomo Corporation in the Apex Silver Mines Limited Chapter 11 case as pre-petition secured lender, DIP lender, and acquirer (from Apex's non-debtor subsidiaries) of Minera San Cristobal, the largest silver, zinc, and lead mine in Bolivia.
Attorney Biography
Deanne E. Maynard, chair of the Appellate and Supreme Court practice group, is a partner in the
Washington, D.C. office, and a former Assistant to the Solicitor General at the United States Department of Justice.
Ms. Maynard has argued 12 cases before the Supreme Court of the United States, and she has filed over 100 briefs in that Court. Notably, she worked on some of the most important business cases over the last several Terms. In particular, Ms. Maynard has substantial knowledge and understanding of cutting-edge antitrust and intellectual property issues. Her arguments include the patent case MedImmune, Inc. v. Genentech, Inc. and the antitrust case Pacific Bell Telephone Company v. linkLine Communications, Inc.
She was also a principal author of the briefs for the United States in Bell Atlantic Corp. v. Twombly and
Quanta Computer, Inc. v. LG Electronics, Inc., and briefs at the certiorari stage in Bilski v. Doll and American Needle, Inc. v. National Football League.
In addition to her substantial Supreme Court experience, Ms. Maynard has argued and briefed significant cases in the federal courts of appeals. She is currently working on several patent matters in the Federal Circuit involving issues of validity, infringement, and inequitable conduct.
Ms. Maynard served in the Solicitor General’s office from 2004-2009. Before joining the Solicitor General’s office, Ms. Maynard was a partner at Jenner & Block for more than five years. Her practice at Jenner involved a wide variety of complex litigation matters at all levels of the federal judiciary, ranging from a multi-billion dollar government contracts case to media and First Amendment litigation.
After law school, Ms. Maynard clerked twice on the Supreme Court of the United States. During the October 1994 Term, she clerked for Justice Stephen Breyer in his first year on the Court. During the 1993 Term, she clerked for retired Supreme Court Justice Lewis Powell and affiliated with Justice John Paul Stevens. From 1991-1993, Ms. Maynard clerked for Judge Stanley Harris of the U.S. District Court for the District of Columbia.
Ms. Maynard graduated magna cum laude in 1991 from Harvard Law School, where she was an editor of the
Harvard Law Review. She earned a B.A., with distinction, in English from the University of Virginia, where she was also Phi Beta Kappa and Omicron Delta Kappa.
Ms. Maynard is the current Chair of Programming for the Coke Appellate Inn of Court, and has been actively
Deanne E. Maynard
Partner
2000 Pennsylvania Ave., NW Washington, D.C. 2006-1888 (202 887-8740
Attorney Biography
In September 2007, Ms. Maynard received a Certificate of Commendation from the U.S. Department of Justice for outstanding performance and invaluable assistance in support of the activities of the Environment and Natural Resources Division.
Education
University of Virginia (B.A., 1987) Harvard Law School (J.D., 1991)
Publications
• “U.S. Supreme Court Invites Solicitor General’s Views on Whether to Grant Review of Important Securities Fraud Case,” January 11, 2010
• “Supreme Court Does Not Revive Abandonment as Defense,” June 17, 2009
Rankings
Listed as a Leading Individual in Best Lawyers in America 2011, Appellate Law in Chambers USA 2010 and
Attorney Biography
Anthony Princi
Partner
1290 Avenue of the Americas New York, NY 10104-0050 (212) 468-8030
Anthony Princi is a partner in the Bankruptcy and Restructuring practice. His practice is concentrated in debt capital markets and restructuring, and he has extensive experience in representing corporate debtors and secured and unsecured creditors' committees in cross-border bankruptcy proceedings and out-of-court restructurings. Mr. Princi regularly represents "special situations" investors in private debt and equity transactions. Mr. Princi also has extensive trial experience in securities and commercial litigation.
Education
Fordham University (B.S., 1979)
Fordham University School of Law (J.D., 1982)
Representative Matters
• Ambac Financial Group, Inc. Represent the Official Creditors’ Committee in the Chapter 11 proceeding of this well-known, multi-national monoline insurance company
• FGIC Corporation. Represent the Official Creditors’ Committee in the Chapter 11 bankruptcy proceedings of this large monoline insurance company
• Mission Insurance Group. Represented the Official Creditors’ Committee in the Chapter 11 proceedings of this property and casualty insurance company, which resulted in the preservation of approximately $2 billion of NOLs for the benefit of creditors
• Home Holdings, Inc. Represented the Official Creditors’ Committee of this well-known insurance company, which resulted in the issuance to bondholders of Earn Out Notes that monetized the value of this holding company’s NOLs for their benefit
• Reliance Group Holdings, Inc. Represented the Official Creditors’ Committee in the Chapter 11 restructuring of one of the U.S.’s largest insurance companies ($12.6 billion in assets), with approximately $500 million of public debt and an additional $250 million in bank debt
• Home Holdings Inc. Represented the ad hoc bondholders’ committee of the holding company of this large property and casualty insurance company with $400 million of creditor claims, in a successful
Attorney Biography
• Stone & Webster, Inc. Represented the Official Committee of Unsecured Creditors in the Chapter 11 case of Stone & Webster, an international engineering and construction concern with creditor claims in excess of $2 billion
• Eurotunnel. Represented the unrestricted ad hoc Committee of Eurotunnel Tier 1, 2 and 3 secured lenders, collectively holding over €800 million of debt, in the widely publicized restructuring of the Anglo-French Channel Tunnel operator
• Millicom International. Represented the ad hoc Committee of Bondholders in the exchange offer and consent solicitation for Millicom International Cellular S.A., a Luxembourg-based global
telecommunications investor ($962 million of bond debt)
• Arena S.p.A. Represented the ad hoc Noteholders Committee in the negotiation and implementation of the restructuring of this well known Italian poultry producer
• Fantuzzi. Represented the ad hoc Committee of Noteholders of Fantuzzi Finance S.A. in the first successful negotiated restructuring of an Italian company with public debt
• My Travel. Represented the ad hoc Committee of Bonding Facility Holders in the successfully negotiated financial restructuring of this pan-European travel company
• UPC Polska Inc. Represented the largest public debt holder in the restructuring of the largest cable television company in Poland ($450 million of bond debt)
• Vantico. Represented the largest debtholder in the proposed restructuring of this Luxembourg-based international chemicals group ($1 billion of bond debt)
• Welcome Break Finance plc. Represented the B Noteholder Committee in the proposed restructuring of this well known national motorway service station owner (£376 million of bond debt)
