Court Confirms Armstrong's Reorganization Plan

Wilmington, DE, Nov. 19--The bankruptcy judge overseeing the Chapter 11 case of Armstrong World Industries said Tuesday he would recommend confirmation of the building maker's plan of reorganization. U.S. Bankruptcy Judge Randall J. Newsome overruled objections of business creditors to the plan. Under the plan, a trust would be set up to pay the asbestos injury claims that drove Armstrong World to seek bankruptcy court protection. As confirmation neared, large creditors stepped up efforts to delay the plan to await federal legislation on asbestos liabilities, a move they said could save the company about $1 billion. The Wilmington bankruptcy court judge refused, saying the current bill isn't a law and shows no sign of becoming law any time soon. Large business creditors voted against Armstrong World's plan of reorganization and turned what was expected to be a consensual process into a contest. Newsome's ruling followed two days of hearings. Small business creditors appear to have favored the plan. According to the voting tally, business creditors were split about their opinion on the plan, with smaller claimants favoring the plan and larger creditors opposing it. Results filed with the court show 1,646 voters holding about $266 million in claims against Armstrong World backed the plan, compared with 224 voters with $880 million in claims who rejected it. Armstrong World's plan sets aside about $982 million for commercial creditors, a recovery of about 59.5%. Asbestos personal-injury claimants, whose claims against the company are expected to add up to at least $4.7 billion, will get a recovery estimated at about 20% from a trust to be set up. Newsome said that, given the relatively higher rate of recovery for business creditors under the plan, Armstrong World hadn't unfairly favored the asbestos claimants. The asbestos trust to be created will have $234.5 million in cash, $519.25 million in notes and warrants for stock in the new reorganized Armstrong World. Existing shareholders of the company will get warrants for new Armstrong stock valued at between $35 million and $40 million, under the plan.