Insurance spat threatens WTC rebuilding -developer

NEW YORK, May 18 (Reuters) Construction of the new Freedom Tower on the site of the World Trade Center cannot proceed if insurance companies withhold payments as they have suggested they may do, the developer of the site told a state Assembly hearing today.

Developer Larry Silverstein said the insurance companies had suggested they might withhold payments as a result of the new agreement he reached with the landowner, the Port Authority of New York and New Jersey.

Silverstein's framework deal with the Port Authority would divide as much as 4.6 billion dollars in insurance proceeds between them as well as tax-free Liberty Bonds.

The agreement also calls for Silverstein to meet aggressive deadlines in speeding the rebuilding at the site, which was destroyed in the Sept. 11, 2001, hijacked airplane attacks and has long been stalled.

''If the insurance company proceeds are not available you won't be able to build the building,'' Silverstein said. He stressed that building the Freedom Tower required both the insurance proceeds and the tax-free Liberty Bonds.

Silverstein, speaking at a state Assembly hearing in Lower Manhattan, said both the governors of New York and New Jersey, the New York mayor, and the New York state superintendent of insurance were aware of the issue and he called on them for their help.

Silverstein said litigation was not an option in solving the new battle with the insurers and that the issue had to be solved if he was to avoid missing the tight deadlines in agreement with the Port Authority.

''Without the insurance company proceeds, you don't meet the milestones,'' he said, adding he received insurance proceeds on a monthly basis.

The Assembly hearing was held at 7 World Trade Center, the first building to be erected as part of the redevelopment. Silverstein noted the Liberty Bonds for 7 World Trade Center were not sold until it was two-thirds completed.

Reuters DKS GC019