Highlands Insurance Group Inc. of Lawrenceville, N.J. announced it has begun Chapter 11 bankruptcy proceedings along with five of its non-insurance subsidiaries in the United States Bankruptcy Court for the District of Delaware.
The company and its debtor subsidiaries will be debtors in possession and have filed a joint plan for the reorganization of their debts. The joint plan will not become effective until the bankruptcy court approves it.
Under the plan as proposed, the assets of the debtors will be transferred to a liquidating trust for the benefit of the debtors’ secured and unsecured creditors and the holders of Highlands’ Series One Preferred Stock in accordance with the terms of a liquidating trust agreement. The company’s common stock will be cancelled with no consideration being paid.
In December of 2001, because of continuing financial losses, the company adopted a plan to run-off its insurance business and cause its insurance company subsidiaries to cease issuing new or renewal policies, except as otherwise required by law. Regulatory actions taken by various of the State Departments of Insurance prohibit Hihglands’ insurance company subsidiaries from making any dividend or tax sharing payments to the Company, and have thereby eliminated the company’s only significant sources of revenue. The bankruptcy filings arose as a result of the foregoing and the firm’s substantial debt servicing requirements.
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