Armstrong Payouts To Be Smaller
Wilmington, DE, May 6--If you were expecting to get paid something out of Armstrong World Industries' bankruptcy reorganization, expect something less.
Armstrong attorney Debra A. Dandeneau said in U.S. Bankruptcy Court that the amounts to be received by the two of the biggest groups in the case will be "revised downward."
While the company is more than a week away from announcing the specifics, Dandeneau indicated the revision will be significant.
"We expect it not to be immaterial," she said.
Armstrong's unsecured creditors and asbestos personal-injury claimants will get paid less than initially envisioned last November, because the company's operating profits have weakened since then, she said.
The exact number of creditors and claimants to be affected is not known. But in earlier public filings, Armstrong has indicated it has hundreds of unsecured creditors and more than 170,000 personal-injury claimants.
In other developments during the 80-minute hearing:
--Court approval of a key document that will be sent to everybody voting on Armstrong's proposed reorganization plan was delayed again, to May 19, to allow for further revisions.
Despite the postponement, Armstrong attorneys after the hearing expressed confidence that the firm still would emerge from bankruptcy by its stated deadline of Sept. 30.
--Attorneys for Armstrong and a committee representing the asbestos property-damage claimants in the case said they are "very close" to settling all remaining claims, which would resolve one of the thorniest issues in the case.
An Armstrong attorney suggested that the bankruptcy judge, Randall J. Newsome, serve as a mediator between the two sides to help bring a settlement to fruition.
--Newsome gave Product Systems International, a Lancaster firm that alleges Armstrong's innovative "i-ceiling" line was based on PSI's ideas, a two week deadline to take legal action.
PSI has filed court papers indicating it intends to sue, but has not done so. Likewise, it has filed a bankruptcy claim against Armstrong, but for an unspecified amount.
Newsome said PSI has until the deadline to file its civil suit and an amended claim in bankruptcy court. Armstrong denies the PSI allegation, saying its line was created independently.
Armstrong was shoved into bankruptcy in December 2000 by a flood of lawsuits from people alleging personal injury from exposure to asbestos insulation that was once sold and installed by Armstrong.
Last November, Armstrong proposed a plan for reorganizing and emerging from bankruptcy by dissolving its current corporation and canceling its current stock.
It then would form a new corporation with a new stock, two-thirds of which would be owned by a new trust.
The trust, funded with $2.1 billion worth of new stock, cash and notes, would pay all pending and future asbestos personal-injury claims, forever relieving the new Armstrong of that burden.
The other third of the new stock would help fund a $1.1 billion pool to pay the unsecured creditors (i.e., creditors that lack collateral that would assure they get paid.)
Armstrong has yet to say how much the personal-injury claimants would get out of that $2.1 billion trust; the company has said that unsecured creditors would get 66.5 percent of what they're owed.
But Armstrong's declining operating profits have triggered a chain reaction that will culminate in both groups getting paid out of a smaller "pot," so to speak.
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