EXECUTIVE LIFE DEAL SEEN CLOSE TO COLLAPSE

EXECUTIVE LIFE DEAL SEEN CLOSE TO COLLAPSE

California Insurance Commissioner John Garamendi Wednesday urged a superior court judge to allow a French banking group to buy the junk-bond portfolio of failed Executive Life Insurance Co. before the deal collapses.

During a three-hour hearing, Mr. Garamendi told Los Angeles Superior Court Judge Kurt Lewin that about $270 million of the junk bonds in ELIC's portfolio have defaulted since December."The French are getting frightened. No kidding. They really are," said Mr. Garamendi's attorney, Karl Rubinstein.

The defaults involve bonds issued by a number of companies including Orion Pictures Corp. and R.H. Macy & Co.

Altus Finance, the French banking group that plans to buy the portfolio for $3.25 billion, has advised Mr. Garamendi that it is losing big sums every month the deal does not close.

"Altus has acted honorably throughout this transaction and I do not believe that will change," Mr. Garamendi said.

"I believe that we must move very quickly to demonstrate that the deal can be cleared through the court right away."

Altus Finance, a subsidiary of French bank Credit Lyonnais, won the bidding for Executive Life last year along with insurer Mutuelle Assurance Artisanale de France, who will invest $300 million in the company.

But the sale still has yet to be approved by the court.

Attorneys representing ELIC say Altus and Mutuelle should not be allowed to buy the portfolio.

Attorneys fear that the French group will take what it wants from the junk-bond portfolio, but not buy the company itself.

Judge Lewin, who had been expected to make a decision by the end of the month, gave the lawyers five days to issue their objections to the bond sale in written form.

California seized Executive Life last April amid severe financial losses brought on by its exposure to the junk-bond market.