Mark Walter’s holding company plans to buy up to $6.5 billion in assets from a troubled life insurer he controls that is at the center of a controversy over his sale of the Lakers.
Delaware Life Insurance Co. said in a regulatory filing Tuesday that TWG Global will buy that much of affiliated assets that were found on its books amid a federal investigation.
Affiliated, or related-party, assets, while legal, are between businesses that have ties and pose potential conflicts of interest; they require disclosure and typically extra regulatory scrutiny.
Delaware Life stated in a prior filing that after it received a grand jury subpoena in February, an internal investigation uncovered more than $16 billion of its loans that needed to be reclassified as affiliated or related-party.
The restatement brought such loans to 40% of its invested assets as of Dec. 31, according to Fitch Ratings. The credit rating outfit said that is the most of any North American life insurers it reviews. Company executives told Fitch they were unaware they were making related-party loans.
The loans were made to entities associated with Walter or TWG, and federal authorities are investigating whether they were passed through third parties, Bloomberg has reported, citing unnamed sources familiar with the investigation.
Delaware Life started a remediation plan months ago to restructure some of the loans, including through the TWG purchases, according to S&P Global. It hopes to complete the plan by the end of the year.
Clear Spring Life and Annuity Co., another Delaware insurer Walter controls through TWG, said that it cut related transactions by $90 million, in a separate filing Tuesday. The company has had to restate $4.6 billion of its assets as affiliated or related-party.
Credit rating agencies Fitch, S&P Global and AM Best have all downgraded the outlook for the two insurers, though they still rate them highly financially.
The “companies are working with the Delaware Department of Insurance to address the identified investments,” a TWG Global spokesperson said in a statement. “TWG is committed to resolving this matter to the Department’s satisfaction.”
The purchase of the $6.5 billion in assets must be approved by the department, which has not responded to requests for comment.
The investigation has extended to Walter himself. Authorities seized his cellphone and laptop aboard his private plan in Chicago in September, according to Bloomberg.
Investigations by prosecutors and securities regulators can result in no action.
TWG has stated it is cooperating with the investigation and that it and Walter “have always acted in good faith, and those who have done business with Mark know him as honest and straightforward. Nothing about these transactions was any different.”
The need for the insurers to reduce their related-party holding has sparked speculation they prompted a group led by Walter to sell its majority stake in the Lakers this month for $12.5 billion to venture capitalist Joshua Kushner and former Disney Chief Executive Bob Iger. Walter’s group had acquired the stake only last year.
Walter, 66, chief executive of Chicago investment firm Guggenheim Partners, is reportedly looking for other ways to raise money to continue buying down the insurers’ affiliated or related-party assets.
He has also explored selling his stake in the U.K. soccer club Chelsea FC to Clearlake Capital, the majority owner of the London-based football club, people familiar with the matter told Bloomberg.
Walter has a long history of tapping his insurers for his business dealing.
He led a group that included another Guggenheim executive and Magic Johnson in acquiring the Dodgers for $2.15 billion in 2012. The Times has reportedhe tapped the insurers he owned for financing, a deal that was later vetted by state insurance regulators.
Bloomberg News contributed to this report.
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