A partnership headed by San Francisco investment banking firm Hellman & Friedman said Wednesday that it would make a bid to acquire Executive Life Insurance Co., the Los Angeles company seized by state regulators in April.
Hellman & Friedman, whose partners include the Zell/Chilmark Fund and Fund American Cos., becomes the fourth group to bid or announce intentions to make an offer for the junk bond-laden life insurer.
No details of the Hellman & Friedman proposal were released. But spokesman Charles Perkins said: "It will be clear ours is the most viable bid and provides the greatest value to policyholders."
The only formal bid to date has been made by a group of French investors headed by Altus Finance and Mutuelle Assurance Artisanale de France (MAAF). That proposal calls for Altus to acquire Executive Life's junk bonds for $2.7 billion and for MAAF to infuse $300 million and operate the new company.
The National Organization of Life & Health Insurance Guaranty Assns., which represents state guaranty funds nationwide, also announced plans to make a bid. NOLHGA claims that its offer is better for policyholders than the French bid and will include $1 billion from the state guaranty funds. It also would keep Executive Life's junk bond portfolio intact.
In addition, a group that includes record industry executive David Geffen, Texas investor Richard Rainwater and money manager Bechtel Investments has said it is studying the possibility of making an offer for Executive Life.
All bids must be submitted by Oct. 11 to a Los Angeles Superior Court, which is overseeing the state's proposed rehabilitation plan for Executive Life. The treatment and valuation of the junk bonds, which will be aired in public hearings, could determine which offer is ultimately accepted.
Perkins said Hellman & Friedman would provide a higher payout to policyholders than what is promised under the earlier French bid partly by leaving Executive Life's huge portfolio of junk bonds in the company.
"We believe there is substantial value to those bonds and that should go to the policyholders," he said.
However, Dale Leibach, a spokesman for the French group, however, argued that its bid was preferable to the Hellman & Friedman proposal because removing junk bonds is would be the only way to restore stability to the company.
"High yield securities are very volatile," he said. "While they have gone up recently, they also have gone way down. I don't see how policyholders should be asked to bear that risk."
The bid by the French group offers to pay most policyholders about 81% of their investment. The remainder would be made up by state guaranty funds. The percentage to be given policyholders under the Hellman & Friedman proposal was not disclosed, but any shortfall would also be made up by the state funds.
Hellman & Friedman, which manages funds for institutional investors, has a reputation as a conservative investment house. It advised BankAmerica in its acquisition of Security Pacific earlier this year. In its only major leveraged buyout, it advised family members of Levi Strauss in taking the company private in 1985. The buyout is regarded as an example of how such deal can properly work.
Hellman & Friedman said it would appoint Jack Byrne, chairman of Fund American, to be chairman of the recapitalized Executive Life. Fund American until recently owned Fireman's Fund Insurance Co., the largest insurance company in California.
Chicago-based Zell/Chilmark, which manages a large investment pool from institutional investors nationwide, has been active in making bids for troubled properties. On Tuesday, creditors of Carter Hawley Hale Stores accepted a $258-million offer that could give Zell/Chilmark control of the bankrupt retailer.