After Bankruptcy: What’s Ahead for Armstrong?

Lancaster, PA, August 16, 2006--For nearly six years, Armstrong World Industries has competed with one arm tied behind its back, bound by the bankruptcy reorganization process, according to the Lancaster New Era. That limb soon will be released, reported the newspaper, due to a federal judge’s pivotal decision Tuesday that’s expected to let Armstrong emerge from bankruptcy by year-end. What’s unclear, though, is how the Lancaster-based manufacturer of floors, ceilings and cabinets will use its new-found freedom. For more see: http://local.lancasteronline.com/4/24898 Also unknown is how the impending change in Armstrong’s ownership and board--as specified in its reorganization plan--might affect the company’s operations. “We can’t speculate on what will happen post-emergence,” said Armstrong spokeswoman Dorothy Brown Smith. “Going forward, our focus will be to continue growing our business, increasing profitability and improving our products and market share to make Armstrong the best possible company it can be,” she added. Armstrong is one of the county’s largest employers, with 2,000 local workers. Its direction affects not only those employees, but its hundreds of retirees and suppliers here as well. The firm entered bankruptcy in December 2000 to deal with a deluge of claims from people saying they suffer personal injury from exposure to asbestos insulation the firm once made and installed. By the time Armstrong entered bankruptcy, it faced nearly 200,000 such claims, costing the firm tens of millions of dollars in damages a year. The filing automatically stopped those payments until Armstrong got a reorganization plan confirmed, which the judge did Tuesday, and emerges from bankruptcy. In a prepared statement, Armstrong chief executive officer Michael D. Lockhart expressed gratitude “for the support of our employees, customers, suppliers and other business partners during the reorganization process.” Cutting Armstrong loose from bankruptcy was U.S. District Judge Eduardo C. Robreno. Robreno denied an objection to the Armstrong reorganization plan filed by the company’s unsecured creditors, who have tried for years to get more money out of the Armstrong plan. These creditors, mostly Armstrong’s bondholders, had argued the plan unfairly discriminated against them and favored people suffering personal injury from exposure to Armstrong asbestos insulation. But the Philadelphia-based judge ruled that the basis for the plan’s payouts--that Armstrong faces $3.1 billion in present and future asbestos liability--is “a reasonable approximation.” With that 60-page decision, Armstrong appears at long last to be headed out of bankruptcy, whether or not the unsecured creditors appeal Robreno’s decision. Armstrong can come out of bankruptcy anyway, as long as it gets the consent of the representatives of the present and future asbestos claimants. Those groups support the Armstrong plan. The unsecured creditors can block Armstrong’s emergence only if they convince a federal judge to issue a stay while the appeal is heard. Attorneys for the unsecured creditors could not be reached for comment. When Armstrong gets out of bankruptcy, big changes will result--part of the price Armstrong is paying to resolve its asbestos liability once and for all. The reorganization plan calls for its parent company, Armstrong Holdings, to be dissolved and its stock canceled, leaving current stockholders with nothing. A new corporation will be created, with two-thirds of the stock given to an asbestos trust that will pay asbestos-injury claims and a third given to the unsecured creditors. The stock will be part of the $1.8 billion given by Armstrong to the trust, in return for the trust handling all current and future asbestos-injury claims, and the $982 million given to the unsecured creditors. For more see: http://local.lancasteronline.com/4/24898