Saturday, November 21, 2009

ONGOING COVERAGE: METROPOLITAN MORTGAGE BANKRUPTCY

Second Met payout planned

Settlements yield funds for investors in bankrupt conglomerate

Previous coverage: • Metropolitan Mortgage bankruptcy

John Stucke
Staff writer
June 20, 2008

A long-awaited cash distribution to investors of bankrupt Metropolitan Mortgage and Securities will be mailed in late July.

Maggie Lyons, trustee for the investors, said people holding Metropolitan notes will receive about 10 cents on the dollar. Noteholders of Metropolitan affiliate Summit Securities Inc. will receive about 6 cents on the dollar.

The checks will be issued by Wells Fargo Bank. Lyons reminded investors that the checks mailed will have a Wells Fargo return address.

ADVERTISEMENT

It's the second payout following the collapse of the $2.3 billion financial conglomerate that had been a Spokane institution for 50 years.

Metropolitan filed for bankruptcy in February 2004 after its aggressive commercial lending and real estate businesses stumbled and an accounting scandal and federal investigations engulfed what was left.

In a letter to investors, Lyons estimated that a third payout, potentially later this year, would bring the total repayment to investors to 33 cents on the dollar.

Other payouts could be forthcoming, but those depend on future real estate sales and possible legal settlements.

Funds for the second payout include $30 million from a legal settlement with former auditor PriceWaterhouseCoopers, along with $11.5 million freed up by settling disputes with the Washington Insurance Commissioner's office regarding the receivership of Metropolitan insurance affiliate Western United Life Assurance Co.

Lyons warned investors about solicitations from sophisticated buyers of distressed debt who were offering to buy claims for lowball offers of 4 cents on the dollar.

Metropolitan financed many of its business activities by selling unsecured corporate bonds, called debentures, to thousands of regional investors.

Some of the money also was used to repay earlier bond obligations.

According to court records, more than 10,000 investors hold $357.2 million in Metropolitan debt securities.

Thousands more held $102 million in preferred stock that was rendered worthless by the bankruptcy.

About 6,600 investors hold $112.8 million in debt securities issued by Metropolitan's sister firm in Idaho, Summit Securities Inc.

Thousands more held $29 million in preferred stock.