Majestic Capital files bankruptcy after unit placed in conservation

By Caroline Salls

Pittsburgh, May 2 - Majestic Capital, Ltd. filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the Southern District of New York.

According to a company news release, trading in Majestic Capital's common stock on the Nasdaq Capital Market was halted Monday and will remain halted through the effective date of Majestic Capital's voluntary delisting under the notice of delisting that it filed with the Securities and Exchange Commission on April 29.

Last week, the company announced that its principal subsidiary Majestic Insurance Co. had been placed into conservation and rehabilitation proceedings by the California Department of Insurance Commissioner.

The company said the commissioner simultaneously filed a motion for approval of a proposed rehabilitation plan designed to protect Majestic Insurance's policyholders and claimants from loss connected with the conservation.

Under the rehabilitation plan, Majestic Insurance's insurance liabilities and some assets will be transferred to AmTrust North America, Inc., which will assume responsibility for the administration and payment of all policyholder claims under Majestic Insurance's policies.

The plan also includes a loss portfolio transfer reinsurance agreement, sales of renewal rights and an asset purchase transaction.

According to a commission news release, the New York Workers' Compensation Board filed a lawsuit in December 2009 seeking more than $400 million in damages from Majestic Insurance, parent Majestic Capital and several of the key officers of the organizations.

As a result of this action, AM Best reduced the rating of Majestic Insurance, which in turn decreased premiums written and increased expenses and losses.

According to court documents, Majestic Capital had $436.19 million in total assets and $421.76 million of total debt as of Dec. 31.

The company's largest unsecured creditors include The Bank of New York Trust Co., NA of Houston, with a $36 million guarantee claim and Wilmington Trust Co. of Wilmington, Del., with an $8.09 million claim.

The company is represented by Genova & Malin, Attorneys.

Majestic Capital is a Bermuda-based specialty provider of workers' compensation insurance. The Chapter 11 case number is 11-36225.

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