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Spokane, Washington  Est. May 19, 1883
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News >  Business

Met failure to end in pennies on dollar

The Metropolitan Mortgage & Securities Co. bankruptcy could be wrapped up by Jan. 4, nearly two years after the Spokane company filed for protection from creditors.

Metropolitan’s more than 16,000 investors can expect an initial payback of 7 cents to 9 cents on the dollar after the reorganization plan takes effect, if it’s approved by creditors, according to documents filed in bankruptcy court. Investors bought about $470 million in unsecured bonds, called debentures, from the once-venerable firm, which hadn’t missed a payment in 50 years.

Many of the investors are older than 65 and living in the Northwest, their investments reduced to claims.

As expected, the reorganization plan doesn’t call for any recovery for investors who held the company’s preferred shares.

The timeline is the most definitive since Metropolitan filed for bankruptcy in February 2004, said Maggie Lyons, acting chief executive officer of the company.

Lyons said Metropolitan has about $36 million in cash on hand after selling property and other assets.

Of that, more than a third will be held back because of unresolved matters, including a controversial $200 million claim pressed by the Washington Insurance Commissioner’s Office on behalf of Western United Life Assurance Co., an affiliate of Metropolitan.

Without the claims and a few administrative expenses, the payout to creditors of Metropolitan and sister company Summit Securities Inc. would have totaled about 14 cents on the dollar.

The sum does not include several significant opportunities for cash recoveries that could one day boost the payback to creditors. Among them:

“ An arbitrated settlement with one-time Metropolitan auditor Ernst & Young LLP.

“ A lawsuit award or settlement with another former Metropolitan auditing firm, PriceWaterhouseCoopers LLC; Metropolitan filed suit against the company earlier this week.

“ The sale of insurance affiliates Western United Life Assurance Co., Old Standard Life Insurance Co., and Old West Life Insurance and Annuity Co.

“ Lawsuits against former Metropolitan Chairman and CEO C. Paul Sandifur Jr. and his immediate family for alleged fraudulent transfers of cash and other assets.

Lyons declined to affix a dollar estimate on those potential recoveries, but lawyers close the case have said the company will seek hundreds of millions of dollars from the auditing firms.

The insurance companies have equity of between $80 million and $100 million, although whether they fetch such money in a sale by the insurance commissioners of Washington, Idaho and Arizona remains to be seen.

Many of the investors stung by Metropolitan’s failure have sold their claims to firms that specialize in buying bankruptcy claims.

One of those companies, Argo Partners, is now one of Metropolitan’s largest creditors. Of the $36 million on hand, Argo has rights to about $4.6 million.

Other stressed-debt buyers with claims on the $36 million include Seaport Group LLC, $340,000; Debt Acquisitions, $251,000; Midtown Claims LLC, $588,000; and Sierra Liquidity, $414,000.

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