Armstrong Resolving More Bankruptcy Issues

Lancaster, PA, August 27--As Armstrong World Industries waits for a new federal judge to decide whether it can emerge from bankruptcy, the company wants its plan for emerging to remain the only one the judge considers, according to the Lancaster New Era. And while those key issues play out, the company is resolving several long-running disputes, according to recent filings by Armstrong in bankruptcy court. Armstrong’s effort to get out of bankruptcy – and resolve the tens of thousands of asbestos-injury claims that put the company there 3 1/2 years ago – has been in limbo since last fall. That’s when a bankruptcy court judge recommended approval of Lancaster-based Armstrong’s plan. But because of the plan’s treatment of asbestos claims, the plan needs a district judge’s blessing, and that’s where the process got mired. The district judge assigned to the Armstrong case, Alfred M. Wolin, held off because his impartiality was being challenged in another large asbestos case, the Owens-Corning bankruptcy. In May, the 3rd U.S. Circuit Court of Appeals took Wolin off the Owens-Corning case and in June, Wolin resigned from the bench, further clouding Armstrong’s situation. But within days, the 3rd Circuit designated U.S. District Judge Eduardo C. Robreno to assume oversight of Armstrong’s case. In late July, Robreno received reports on the status of the Armstrong case from the company and other parties. Robreno’s next step will be to schedule a conference to discuss how to proceed. “The timing and terms of confirmation and implementation of the plan and resolution of Armstrong’s (bankruptcy) case remain uncertain,” the company said in a filing Monday. Armstrong’s reorganization plan, unveiled in November 2002, calls for switching ownership of the firm from the current shareholders to unsecured creditors and to an asbestos trust that will pay the asbestos claims. The plan is the only one that’s been proposed, as the company has been granted seven extensions of a bankruptcy law prohibition against the submission of rival plans. Armstrong now is asking bankruptcy court for an eighth extension of this “exclusive period,” lengthening it by another six months, from Oct. 4 to April 4, 2005. Extensions are routinely approved in large, complex cases such as the case of Armstrong, a maker of floors, ceilings and cabinets that’s among the county’s largest employers, with 2,500 workers here. As Armstrong strives to keep its plan the only one before Robreno, it’s settling several disputes that have arisen during its bankruptcy. Armstrong and the developer of its Web site, Proxicom Inc. of Reston, Va., have ended a three-year fight over how much Proxicom would be paid, a court filing Tuesday shows. A settlement between Armstrong and its former downtown landlord, I&S Associates, last week was approved by Bankruptcy Judge Judith K. Fitzgerald. Under the accord, I&S, of Northfield, N.J., will receive about $1.5 million, concluding another three-year fight. At issue was the financial impact of Armstrong breaking its lease, with the court’s permission, and leaving the Lancaster Square office building owned by I&S. I&S initially filed a claim against Armstrong for $16.3 million in lost rent, lost maintenance fees and remodeling expenses. Fitzgerald last week also approved an undisclosed settlement between Armstrong and Southwest Recreational Industries, ending a dispute rooted in Southwest’s 1999 purchase of Armstrong’s Martin Surfacing artificial flooring business. Southwest had alleged that Armstrong had failed to fulfill its obligation to perform warranty work on Martin installations, hurting Southwest’s reputation so severely that Southwest had lost more than $10 million worth of business. Armstrong said it had fulfilled its warranty work.

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