Armstrong World Lowers Reorganization Value

Lancaster, PA, May 27--Armstrong World Industries lowered its forecast of its value when it emerges from Chapter 11 bankruptcy protection. Armstrong World, the main operating unit of Armstrong Holdings Inc., estimates its reorganization value at $2.4 billion to $3 billion, down from a prior estimate of $2.7 billion to $3.3 billion, according to a filing with the Securities and Exchange Commission Friday. The company told the bankruptcy court overseeing its Chapter 11 case earlier this month that it would have to lower financial projections it made for the restructured company several months ago because they were now outdated. Armstrong World said at the time the changes could affect its reorganization value and, therefore, the recovery for creditors. In the Friday filing, Armstrong World also lowered the estimated equity value of new common stock it would issue upon emerging from bankruptcy. The company had projected the new shares would be worth $25.60 to $34.40 each, but widened that range to $24.66 to $35.30 a share. The midpoint value of the stock would remain the same, assuming Armstrong World only distributes about 56.4 million shares, instead of 67.5 million shares under the plan, the filing said. Armstrong World also said it would reduce the value of warrants to be issued under the plan to $35 million to $40 million, from $40 million to $50 million. The company said the total consideration would be about $1.8 billion for the asbestos personal injury trust its Chapter 11 plan would set up to pay people who become ill due to exposure to asbestos from Armstrong products. Unsecured creditors with claims against the company would split up about $982 million. Armstrong World estimates unsecured claims will total about $1.65 billion, and that the plan will provide unsecured creditors a recovery of about 59.5% of their allowed claims, the filing said. Existing stock in Armstrong Holdings would be canceled under the plan, but those shareholders would be eligible to receive warrants for stock in the reorganized Armstrong World, the filing said. Armstrong Holdings would be dissolved under the plan. Armstrong World filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court in Wilmington, Del., in December 2000 to manage asbestos liabilities from products that it manufactured. Under the terms of its proposed plan, Armstrong World has anticipated paying asbestos personal injury claimants, by far its largest creditor group, from a trust. The trust was to receive $234.5 million in cash, $519.25 million in notes and warrants for $1.34 billion in stock, attorneys representing Armstrong World have said. People who claim damage to their property from asbestos are to share $2 million.