Bankruptcy exit plan for generator firm gains
Babcock & Wilcox would establish trust
The Toledo Blade, October 12, 2004
NEW ORLEANS -The Babcock & Wilcox unit of McDermott International
Inc. has won court approval of its plan to emerge from bankruptcy by putting
assets worth about $1.8 billion into a trust to pay more than 222,000
Babcock & Wilcox, one of the world's largest makers of steam generators,
used asbestos in products until the mid-1970s.
The trust follows a model established in the bankruptcy of Johns- Manville
Corp., which paid workers more than $2.7 billion in a settlement that
became part of U.S. bankruptcy law.
Under the proposal, all shares of Babcock & Wilcox, with an estimated
worth of $400 million to $500 million, and insurance rights valued at
as much as $1.15 billion would be put into a trust for asbestos-injury
New Orleans-based McDermott will contribute 4.8 million shares and a
$92 million note as part of a related settlement.
"This case has already lasted too long; the professional fees and
expenses have already been far too costly - $85,666,633," U.S. Bankruptcy
Judge Jerry Brown in New Orleans wrote in a 106-page ruling. "The
time has come to move this case forward."
Judge Brown's action moves Babcock & Wilcox closer to ending its
stay in bankruptcy after four years and eight months. The plan is subject
to approval of a U.S. district judge.
The company doesn't have a target date to exit bankruptcy because of
potential appeals by creditors, McDermott spokesman Jay Roueche said.
McDermott supports a national asbestos trust that would make such trusts
by individual companies unnecessary.
"We believe a legislative solution is clearly superior to a litigious
system," Mr. Roueche said. The company has written off its investment
in Babcock & Wilcox, he said.
Some asbestos victims who qualify for payment will get anywhere from
$10,000 to $90,000, depending on the severity of their illness, court
papers show. Some insurance companies that issued polices to the company,
including Travelers Insurance Co. and American International Group Inc.,
have agreed to pay into the trust.
Other insurance companies fought the plan and the extent of their liability
will be dealt with in a separate legal proceeding, according to Judge
Babcock & Wilcox filed for bankruptcy in February, 2000, citing the
expense of asbestos-injury lawsuits. The company and its insurers spent
more than $1.6 billion to resolve more than 300,000 asbestos claims before
the bankruptcy filing.
Babcock & Wilcox made equipment used in the nuclear reactors at the
Three-Mile Island power plant near Harrisburg, Pa. One of the reactors
experienced a partial meltdown in 1979.
More than 70 U.S. public companies, including Toledo's Owens Corning,
have filed for bankruptcy due to asbestos liabilities since Manville filed
in 1982. Congress is debating proposals for a national trust fund for
victims of exposure to asbestos, a fibrous material widely used for fireproofing
until the mid-1970s.
Long-term exposure to asbestos can cause lung ailments, including a rare
and particularly lethal form of cancer known as mesothelioma.