Armstrong to Appeal Bankruptcy Ruling

Lancaster, PA, March 28--After getting a surprising detour last month, Armstrong World Industries has taken the first legal steps toward finding a new way out of bankruptcy, according to the Lancaster New Era. The newspaper reported that Armstrong has filed court papers saying it will appeal the decision of U.S. District Judge Eduardo C. Robreno, who found the Armstrong reorganization plan illegal. The Lancaster-based company also filed court papers asking that Armstrong remain the only entity allowed to propose a plan. In the meantime, it's unclear whether Armstrong's plan ultimately will be upheld by the courts or whether Armstrong will have to devise an alternate plan, the company said. Armstrong filed for bankruptcy in December 2000 to resolve a glut of lawsuits alleging personal injury from asbestos insulation it once sold. Robreno rejected the Armstrong plan because it would give kinds of stock options, called warrants, to its shareholders without first paying unsecured creditors in full. Robreno agreed with the unsecured creditors that this provision violated the bankruptcy code. Initially, the unsecured creditors had supported the whole plan, including the warrants provision. But later they switched, one of many moves aimed at derailing the plan until Congress acts on asbestos tort reform -- reform which could leave far more Armstrong money for the creditors. Armstrong had argued that the unsecured creditors' initial consent was binding, but Robreno ruled that the unsecured creditors were allowed to change their minds. Armstrong will appeal to the 3rd U.S. Circuit Court of Appeals. The company did not say when the appeal would be filed. Meanwhile, Armstrong is seeking a ninth extension of the so-called "exclusive period" allowed by the bankruptcy code. During this time, only the company in bankruptcy may offer a reorganization plan. Currently, the exclusive period would expire April 4. Armstrong wants six more months.