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Several Creditor Groups Approve OWENS CORNING’S Plan
September 14, 2006
Owens Corning filed for Chapter 11 protection on Oct. 5, 2000, because
of mounting asbestos-liability claims. OC made a product containing
asbestos, and workers who used the products developed illnesses,
including mesothelioma, and have sued for damages. When the Toledo, Ohio firm filed for Chapter 11, it had $7 billion in assets and $5.7 billion in liabilities.
This week bondholders, shareholders, and other creditors largely voted for Owens Corning's
plan to exit bankruptcy, another landmark in its six-year-old Chapter
11 case. In voting on this latest version of the exit plan - earlier
plans had too much opposition - 94 percent of the bondholders approved
it. The action was key, because some bondholders had been among the
critics of previous bankruptcy-exit plans. Voting in favor were 322
bondholders with more than $1.1 billion in OC debt. Just 18 bondholders
with nearly $65.7 million in debt rejected it, according to court
documents filed Monday. Other non-asbestos creditors also approved the
plan, according to court documents. Approval was needed by half of
respondents to the roughly 250,000 ballots sent out and by holders of
two-thirds of monetary claims,
The remaining big creditor group, the
asbestos-injury claimants, ,including mesothelioma victims, is expected
to approve OC's reorganization plan Friday. Seventy-five percent of the
asbestos claimants have to accept the plan. If they do, that should
clear the way for a court hearing Monday in Pittsburgh after which a judge could give the building products maker approval to emerge from bankruptcy.
OC's reorganization plan calls for paying $5.2
billion to asbestos victims, including the mesothelioma victims, and
banks and some other creditors $2.5 billion. One major dispute in
the case was how much the asbestos claimants were entitled to,
particularly how much was needed to cover future claims. Under the
plan, trusts established to pay asbestos claims would be funded by $4.3
billion in cash and 28.6 million in new company stock.
In all, the company would pay $8.6 billion on
$13.6 billion in claims. Banks would be paid in full, asbestos
claimants 50 cents on the dollar and bondholders 58 cents on the dollar.
The exit plan does have opponents. Schultze
Asset Management LLC, which holds more than $60 million in OC bonds,
has said the firm's reorganization plan does not treat bondholders
equally and was not proposed in good faith. Other entities have filed
objections to OC's reorganization plan. The U.S.
Trustee's Office alleges that OC's distribution plan may discriminate
against creditors that reject the firm's reorganization plan. and that
Kensington International Ltd. and Springfield
Associates LLC , two hedge funds, intend to appeal a dismissed lawsuit
against some company leaders that alleged they breached their fiduciary
duties before the bankruptcy filing. They said in a court filing that
OC's bankruptcy-exit plan could unlawfully protect officers and
directors from their lawsuit.
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