SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 22, 2001
Date of earliest event reported: June 11, 2001
RELIANCE GROUP HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-8278 13-3082071
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
5 Hanover Square
New York, New York
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(Address of principal executive offices) (Zip Code)
(212) 858-3600
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(Registrant's telephone number, including area code)
None
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(Former name or address, if changed since last report)
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
On June 11, 2001, Reliance Group Holdings, Inc. ("RGH") and Reliance
Financial Services Corporation ("RFS"), its wholly-owned subsidiary, filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Southern District of New York
(the "Court"). The cases have been consolidated for the purpose of joint
administration under the caption In re Reliance Group Holdings, et. al Case No.
01-13404 (AJG), and were assigned to Judge Arthur J. Gonzalez.
RGH and RFS elected to file for Chapter 11 relief in order to implement
a financial restructuring of the companies. An agreement in principal has been
reached with holders of the majority of RFS' bank debt and with an ad hoc
committee consisting of holders of approximately 50% of the outstanding
principal amount of RGH's 9% Senior Notes and holders of approximately 50% of
the outstanding principal amount of RGH's 9 3/4 % Senior Subordinated
Debentures, on the major economic terms of a plan of reorganization.
Under the terms of the agreement in principal, RFS' lenders will receive
new 10-year notes issued by the reorganized RFS that will bear interest in kind
at RFS' option and be payable solely from dividends or other distributions
received by the reorganized RFS from Reliance Insurance Company ("RIC"), a
wholly-owned subsidiary of RFS. All current common stock of RGH and RFS will be
extinguished. RFS' bank lenders will receive 86% of the voting power of the
reorganized RFS and be entitled to 100% of all cash recoveries of the
reorganized RFS (other than dividends or other distributions received from RIC)
until such time that the bank lenders shall have received from such cash
recoveries of the reorganized RFS an amount equal to the portion of the RGH
excess cash distributed to RIC under the proposed restructuring, plus interest.
After that point, RFS' bank lenders will be entitled to 86% of all cash
recoveries of the reorganized RFS, excluding all distributions from RIC. The
remaining interest in the reorganized RFS, including cash recoveries from RIC
after full repayment of the new notes, will be distributed to RGH bondholders
and holders of allowed general unsecured claims against RGH on a pro rata basis
based on the claims of such creditors. In addition, the reorganized RGH will
issue 100% of its new common stock to RGH bondholders and holders of the allowed
general unsecured claims. The proposed plan also provides for the distribution,
following payment of administrative expenses and priority claims, of excess cash
of RGH to the RGH bondholders, holders of allowed general unsecured claims
against RGH and RIC on a pro rata basis based on the claims of the those
bondholders and holders of allowed general unsecured claims as of November 15,
2000 and the claims of RIC as of September 30, 2000 (less any claims of the
Internal Revenue Service paid by RGH on account of RIC). All distributions made
to the RGH bondholders under the proposed plan will be divided amount the
holders of the 9% Senior Notes and the holders of the 9 3/4 Senior Subordinated
Debentures on a 85.4% - 14.6% basis.
The terms contained in the agreement in principal will form the basis
for a plan of reorganization to be filed with the Court at a later date. Any
plan of reorganization is subject to approval of the Court.
As previously reported, RIC was placed in rehabilitation by the
Commonwealth Court of Pennsylvania upon request of the Pennsylvania Department
of Insurance, with the consent of RIC> RIC, in rehabilitation under the
Pennsylvania Insurance Commissioner, is a major creditor of RGH. RGH as had
discussions with the Pennsylvania Department of Insurance regarding the terms of
the agreement in principal. The Department, however, has not approved the terms.
On June 11, the Department filed a complaint with the Commonwealth Court of
Pennsylvania seeking to impose a constructive or resulting trust on RGH's cash
and to enjoin any disbursements of the cash. RGH disputes the allegations
contained in the complaint.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
if 1995
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This report contains certain forward-looking statements within the meaning of
the federal securities laws, all of which are intended to be covered by the safe
harbors created thereby. These statements include all statements regarding RGH's
intent, belief and expectations (such as statements concerning RGH's intent to
file a plan of reorganization based on the agreement in principle) and any other
statements with respect to matters other than historical fact. Investors are
cautioned that all forward-looking statements involve known and unknown risks
and uncertainties (some of which are beyond the control of RGH) including,
without limitation, the ability of RGH to implement a restructuring, including a
restructuring containing the terms set forth in the agreement in principal, the
ability of RGH to operate successfully under Chapter 11, the ability of the
Company to obtain necessary approvals of a plan, and the ability of RGH to
obtain necessary Court approvals. Moreover, although RGH believes that any
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could prove to be inaccurate. Therefore, in
light of these known and unknown risks and uncertainties, there can be no
assurances that the forward-looking statements contained herein will prove to be
accurate and the inclusion of such information should not be regarded as a
representation by RGH or any other person that the forward-looking statements
included in this report will prove to be accurate. RGH undertakes no obligation
to update any forward-looking statements contained in the report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the under
signed hereunto duly authorized.
RELIANCE GROUP HOLDINGS, INC.
(Registrant)
By
/S/ GEORGE E. BELLO
Name: George E. Bello
Title: President and Chief Executive Officer
DATE: June 22, 2001
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