Dodgers owner Mark Walter wins partial approval to begin reshaping $20-billion network of loans

An insurer controlled by Mark Walter, the billionaire owner of the Los Angeles Dodgers, received partial approval on its plan to slash a pile of loans that is being scrutinized by the Justice Department.

TWG Global, Walter’s holding company, will buy $3.8 billion of affiliated assets from Delaware Life Insurance Co., according to a statement from the insurer on Thursday. In exchange, Delaware Life will receive an equal amount of unaffiliated assets over the next several weeks.

That’s less than 60% of the $6.5 billion of assets the insurer had previously said it hoped to swap before filing its third-quarter results next month. The move was contingent on winning approval from Delaware’s insurance regulator, which has faced criticism for its oversight of Walter’s insurance firms.

The asset swap is the first step in an attempt to whittle down the more than $20 billion of loans that two insurers controlled by Walter previously said should have been labeled as affiliated but weren’t. The disclosures followed federal subpoenas prying into the arrangements.

Delaware Life has previously said it plans to reduce its share of affiliated investments from about 40% to less than 10% by next June.

Walter, the chief executive officer of Guggenheim Partners, has been rapidly reshaping his empire as he contends with the probe, including an agreement to sell his controlling stake in the Los Angeles Lakers. He has also agreed to offload his stake in the Chelsea Football Club.

TWG Global has explored a range of other deals that could free up cash and reduce what he owes his insurers, which oversee financial backstops for everyday Americans.

Industry rules allow insurers to lend money to related parties but require that the dealings be disclosed. Regulators then scrutinize those arrangements to ensure that a firm’s owners don’t put their interests ahead of policyholders.

The extraordinary amounts of investments from Walter’s insurers to his other businesses have come to light in the wake of an investigation being conducted by the Southern District of New York. The probe has sparked questions about how Walter was able to borrow from his insurers without having them disclose the arrangements to state regulators as required.

The head of Walter’s insurance companies, Dan Towriss, has told prosecutors he was unaware that the firms had lent more than $20 billion to the sports mogul’s other businesses, according to people with knowledge of the matter.

Walter’s TWG Global holding company said in a statement that “no one has been harmed, there is no fraud, and no one at TWG Global has committed any wrongdoing.” The firm added that it’s continuing to work with the Justice Department and SEC “and we look forward to resolving this matter.”

The saga has put a spotlight on Delaware’s regulators: Apollo Global Management Inc. Chief Executive Marc Rowan recently singled out the watchdog for its handling of Walter’s insurance companies.

U.S. Sen. Elizabeth Warren has also pressed the National Assn. of Insurance Commissioners to explain how it’s policing Wall Street firms’ influence over insurers, saying the probe into Walter’s businesses raises questions about regulatory gaps.

“This has been a wake-up moment for the U.S. regulatory system,” Rowan said at an investor conference last month. “Loss of trust comes from regulatory arbitrage. It also comes from allowing situations like have happened with Delaware Life.”

Natarajan and Mider write for Bloomberg.