In a move that is expected finally to bring an end to ABB's asbestos liability problems, and has probably improved its chances of future prosperity, ABB and its US subsidiary Combustion Engineering (CE) have agreed a pre-packaged bankruptcy plan for CE with representatives of asbestos plaintiffs.
The plan is based on Chapter 11 reorganisation which has to be approved first by the claimants and then by the bankruptcy court. At the time of going to press documentation on the agreement in principle had received approval from over 100 000 of the 103 000 or so claimants, with fewer than 1000 dissenting. Bankruptcy court final approval is not a certainty, but this level of support could be expected to improve its chances. In the event CE filed for Chapter 11 bankruptcy 48 hours early in an attempt to head off any last ditch attempt by disaffected claimants to wreck the deal.
Under the agreed scheme all Combustion Engineering assets - mainly property and cash - realisable on the due date would be made available for the payment of asbestos claims. At the end of September 2002, CE's value was reckoned to be US$ 812 million. In addition, ABB has agreed to provide an enhanced payment for the benefit of claimants in the form of ABB stock and cash. The cash payments are to be made in instalments from 2004 to 2009 and could total US$ 350 million, composed of a flat US$ 250 million plus around US$100 m dependent on ABB's future performance. An additional US$ 50 million in ABB stock would be contributed at 2002 last quarter prices.
The plan also provides for a trust that would be set up to handle claims filed after the scheme receives final bankruptcy court approval.
Linkedin
