LandAmerica Financial Group Inc. today became the second Fortune 500 company in the Richmond area to file for bankruptcy protection this month.
The company, based in Glen Allen and the third-largest real estate title insurer in the United States, filed for bankruptcy after announcing a $298 million sale of its three subsidiaries that account for 90 percent of the company's business.
Earlier this month, Circuit City Stores filed for Chapter 11 protection, one week after announcing that it was closing 155 stores and laying off thousands of employees.
Through two subsidiaries, Fidelity National Financial Inc. will buy Lawyers Title Insurance and United Capital Title Insurance for $139.4 million and Commonwealth Land Title Insurance for $158.6 million.
Theodore L. Chandler Jr., chairman and chief executive officer, said today the Chapter 11 petitition in U.S.Bankruptcy Court in Richmond will allow the sale to go forward more quickly and provide money for LandAmerica to settle its debts, listed as $2.8 billion as of Sept. 30.
"This is a good transaction, given the alternatives," Chandler said in an interview with the Richmond Times-Dispatch today.
The proposed sale would transfer 90 percent of the company, with 7,785 employees worldwide and 837 in Virginia (including 619 in the Richmond area), to Fidelity and Chicago Title by the end of the year. At the same time, the holding company and a now-defunct subsidiary will go under protection of the bankruptcy court to deal with debts and extensive holdings in auction-rate securities that LandAmerica has been unable to convert to cash to pay creditors.
The deal emerged as the best alternative to the previously announced merger of LandAmerica into Fidelity, which backed out of the transaction on Friday. Under the merger, Fidelity would have assumed the holding company's debts and securities that have contributed to LandAmerica's cash flow crisis.
Chandler expects a much smaller LandAmerica to emerge from bankruptcy, with a focus on real estate transactions rather than the title insurance operations that have been its core business.
"Businesses will be sold," he said. "We will have a reducing presence in Richmond."
An expedited hearing began this morning in U.S. Bankruptcy Court in Richmond to begin the process of selling the subsidiaries. If the sale is not approved quickly, the company warned that the underwriting companies ultimately could be sold or liquidated at a significant loss in value.
Insurance regulators in Nebraska, where LandAmerica's two big title insurance operations are domiciled, will ask a judge today to name a receiver of the companies in order to protect policyholders.
If approved, the receiver would write a plan for the two companies and help direct their affairs in the interim to make sure claims are still paid.
In a positive sign, Nebraska regulators do not plan to tell the companies to stop issuing new policies.
"The director sees a lot of value in these insurers," said Janette Adair, spokeswoman for the Nebraska Department of Insurance.
-- Michael Martz and David Ress
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