Creditors Want Armstrong To Hold Off On Reorganiza
Lancaster, PA, Sept. 24--Let's look before we leap. That was the point raised Monday by a group in the Armstrong World Industries bankruptcy case, in one of a dozen objections filed against Armstrong's proposed reorganization plan, according to the Lancaster New Era.
The group--the committee representing unsecured creditors--recommended seeing what Congress does with asbestos legislation this fall before jumping into confirming the Armstrong plan.
The reason is simple: If the legislation passes, it would make much more money available to Armstrong for repaying those unsecured creditors, who are owed some $1.7 billion.
Under the "FAIR Act" proposed by U.S. Sen. Orrin Hatch, Armstrong would contribute about $700 million into a national fund that would settle all asbestos personal-injury claims, the committee estimated.
Under Armstrong's own plan, the company would pay $1.8 billion to settle those asbestos claims, putting the money into a trust that would handle the claims and make the payments.
So it makes sense to wait and see if the "FAIR Act" becomes law, because the legislation would leave Armstrong with far more money available to repay its unsecured creditors, the committee said.
As the Armstrong plan now stands, the company would set aside $982 million for the unsecured creditors, who include Armstrong bondholders and suppliers of goods and services. That would be enough to repay them 59.5% of what they're owed.
The committee's filing did not estimate how much more the unsecured creditors might get if the "FAIR Act" passes. But on the surface, the difference would be enough to repay the unsecured creditors in full.
The committee made its objection conditional, noting that it still supports the Armstrong plan, but thinks it's best to hold off on putting the plan into effect until the fate of the "FAIR Act" is known.
Should the Armstrong plan become effective first, then the "FAIR Act" passes, the legislation calls for the contents of asbestos trusts such as Armstrong's to be absorbed by the national fund.
"(A) real possibility exists that premature plan confirmation will result in (Armstrong) paying over $1 billion more than necessary to satisfy their asbestos personal-injury liabilities," the committee said.
Armstrong filed for bankruptcy in December 2000 to resolve the tens of thousands of asbestos personal-injury claims against the firm, stemming from exposure to old Armstrong asbestos insulation.
Last November, Armstrong proposed its reorganization plan, calling for the company's ownership to shift from its current shareholders to the asbestos trust and a fund to pay the unsecured creditors.
Supporting the consensual plan are committees representing the unsecured creditors and the asbestos claimants.
While creditors and asbestos claimants have until mid-October to vote on the plan, Monday was the deadline for parties in the case to file objections against the plan.
Armstrong hopes to emerge from bankruptcy by year's end.
The issue of the Hatch bill first surfaced in the Armstrong case in May, when a bankruptcy judge ruled against tabling action on the case until seeing what Congress does with the bill.
In rejecting the request from an Armstrong shareholder, Judge Randall J. Newsome said: "If I had a crystal ball, or if I had 40 crystal balls, I wouldn't know what Congress is going to do..."
Hatch, a Utah Republican, in May proposed creating a $108 billion, nationwide, asbestos trust fund--financed by insurers and businesses such as Armstrong that face asbestos claims.
His bill's formal name is the "Fairness in Asbestos Injury Resolution (FAIR) Act." It's the latest of many legislative proposals over the years that aim to create a national system to resolve the hundreds of thousands of asbestos claims that have pushed dozens of companies nationwide in bankruptcy.
Related Topics:Armstrong Flooring