Congoleum ask Court to Reinstate its Plan’s Exclus
Washington, DC, October 13, 2006--Congoleum says that a rival Chapter 11 plan proposed by insurers isn't feasible due to lack of funding, and asked the court overseeing its bankruptcy case to reinstate its exclusive right to propose a plan and solicit plan support.
The plan put forth by Continental Casualty Co. and Continental Insurance Co. fails to show how the reorganized company would survive absent insurance coverage for its future asbestos liability, Congoleum said in court papers Tuesday.
At least $207 million in insurance settlement proceeds would be jeopardized, the company said, if the insurers' plan were put into play.
The company has brokered deals with a number of its insurers, other than the Continental companies. Most recently, the company won court approval of a $16.95 million settlement with Century Indemnity.
Congoleum said that the Continental plan's failure to meet the Bankruptcy Code's feasibility requirement - showing that confirmation of the plan won't likely be followed by liquidation or the need for another reorganization - renders the plan incapable of confirmation.
The insurers' plan would, Congoleum said, "incentivize, if not require," holders of future asbestos claims to litigate against the reorganized company, who would be forced to defend against the demands while insurers who back Continental's plan wouldn't have to defend the reorganized company or pay the claims unless they meet certain criteria.
"Depriving Congoleum of relief from these obligations that would normally be discharged by a confirmed Chapter 11 plan will place an unbearable financial burden on the reorganized debtors," the filing said.
Additionally, Congoleum said Continental's plan isn't feasible "due to inherent structural impediments and a lack of creditor support, all of which combine to make confirmation impossible."
The absence of a confirmable competing plan gives the bankruptcy court a basis to reinstate the company's exclusivity periods, the filing said.
The U.S. Bankruptcy Court in Trenton, N.J., ended the company's exclusivity in November 2005, opening the door for the insurers to file their first, rival plan one month later.
The company's own plan, co-proposed by the asbestos claimants committee, was amended - for the 10th time - on Sept. 15. The bondholders committee, which had once proposed its own plan and later joined forces with the insurers, now supports the company's plan.
The court-appointed representative for future claimants also backs the basic economic terms of the company's newest plan, though it hasn't yet approved the final language of the plan, according to the company.
Congoleum said its plan "has the only likelihood of winning broad creditor support" and meeting the requirements for confirmation, and asked that the court declare that the insurers' plan is unconfirmable.
The court will consider the matter at an Oct. 26 hearing. The insurers will, at the same hearing, ask that the court determine that Congoleum's plan isn't confirmable because it fails to treat all current and future asbestos claimants equally.
In court papers, Continental and a host of other insurers said the company's latest plan violates the Code's mandate that all current and future asbestos claimants be treated equally, and violates the Code's trust-funding requirements.
First State Insurance Co. and Twin City Fire Insurance Co. and a host of other insurers said in a filing of their own Tuesday that Congoleum's bankruptcy case has revolved around an "unlawful agreement" between the company and attorneys for certain of its present claimants.
This pact would give such claimants preferential treatment, and absolve the company's owners from asbestos liability in exchange for a minimal contribution to an asbestos trust, while the insurers would be "saddled with a vastly inflated liability," First State and Twin City said.
