Bankruptcy judge OKs LandAmerica core sale

The U.S. Bankruptcy Court in Richmond yesterday approved the sale of LandAmerica Financial Group Inc.'s core operations to Fidelity National Financial Inc. of Jacksonville, Fla.

Stewart Title Guaranty Co. of Houston, the other suitor for the Henrico County-based company's main subsidiaries, was shut out of the deal.

Judge Kevin Huennekens picked up on comments made by attorneys in an overflowing courtroom on LandAmerica's deteriorating financial situation. "Like a melting ice cube, it is going fast," he said.

Huennekens said he was keenly aware of the need to move swiftly on the sale as the only chance for the two underwriters' survival.

The underwriters are LandAmerica's title insurance subsidiaries, Lawyers Title Insurance Corp. and Commonwealth Land Title Insurance Co., which are registered as Nebraska firms.

"I don't find the Stewart Title deal to be credible," Heunnekens said. "It is so conditional that I don't see how it could close by Dec. 22."

Fidelity has said it would walk away from a deal if it can't close by Dec. 22.

Fidelity's $282 million offer includes $157 million to recapitalize the subsidiaries so they can continue operating, according to papers filed Monday with the Nebraska Department of Insurance.

Its cash offer was enough to finance LandAmerica's pension shortfall of $59 million, lawyers for LandAmerica argued. Topping off the pension fund would be a requirement of any deal, they said.

Stewart Title's $256 million offer included $5 million in cash, $41 million in restricted stock in the parent company, $10 million in subordinated notes and a $157 million infusion in the subsidiaries.

Lloyd Osgood, spokeswoman for LandAmerica, said the company is pleased that the judge approved the sale to Fidelity.

"We are optimistic that the [Federal Trade Commission] will permit the deal, which will clear the way for us close on Dec. 22."

FTC approval was Stewart's trump card in claiming it had the better offer.

A lawyer for the FTC said Fidelity's market share with the acquisition would pose substantial risk to competition.

Fidelity's national market share would rise from 26 percent to nearly 46 percent of the title insurance business. Stewart's would have 32 percent of the market, up from its current 12 percent.

Nebraska insurance Commissioner Ann M. Frohman, in Richmond yesterday for the hearing in bankruptcy court, ruled Monday in her state that both companies could proceed with their offers.

She said Commonwealth and Lawyers have precariously low capital levels and their financial conditions are so precarious that their sale needs to be approved immediately.

Lawyers from across the country packed the courtroom, many representing clients who had parked money in LandAmerica's bankrupt 1031 exchange company.

Exchange companies are a way to defer capital gains taxes until investors find other properties to buy.

LandAmerica's 1031 assets were frozen two days before it filed for bankruptcy protection Nov. 26.

About 50 of 450 clients had their money in individual, or segregated, accounts. The other money was commingled or lumped together.

The judge was expected to rule on whether LandAmerica could proceed on settling the $227 million in the segregated accounts, which generally were the largest investments.

Lawyers for people with money in commingled accounts said their clients faced the same tax consequences and should receive the same consideration as people with segregated accounts.

It was unknown yesterday evening whether a decision was made regarding the settlement of these accounts.
Contact Carol Hazard at (804) 775-8023 or .