Owens Corning To Pay $7.7B Asbestos Settlement

Toledo, OH, May 11, 2006—With the floor covering industry awaiting a resolution to Armstrong World Industries’ asbestos problems and bankruptcy, Owens Corning, yesterday said it will pay $5.2 billion to asbestos victims and $2.5 billion to creditors in a settlement that would let the company exit bankruptcy this year. The settlement, if approved by a U.S. bankruptcy judge, would create a company worth about $5.9 billion when it emerges from bankruptcy, including about $3.9 billion in new equity and $1.8 billion of new debt financing. The current stock will be cancelled. The payment to the victims would resolve more than $10 billion in asbestos-related claims. 'The path to justice for victims of asbestos cancer and asbestos poisoning by Owens Corning has been a long and difficult one,'' said John D. Cooney, of the Chicago law firm of Cooney & Conway, who represented asbestos victims."Although nothing can ever repair the loss of lives, today's settlement represents a fair resolution for both the victims and Owens Corning.'' The agreement requires that Owens Corning pay $4.29 billion in cash into an asbestos victims' trust plus 28.6 million shares in the company once it emerges from bankruptcy, Cooney said. Owens Corning is one of more than 70 U.S. public companies that have sought bankruptcy protection since the early 1980s to deal with asbestos suits. Asbestos, a heat-resistant material used in insulation, auto parts and construction products, causes respiratory illness. Prolonged exposure to the fibrous mineral has been linked to a rare form of cancer. The settlement is structured so that, if the current Congress passes legislation to bail out former asbestos makers from liability, Owens Corning may not have to make all of the payments, the company said in a statement. Under the reorganization plan, holders of about $1.5 billion in debt will get as much as $2.27 billion, including interest, the company said in a statement. Current Owens Corning stock holders will receive warrants to buy 5 percent of the fully diluted shares of the reorganized company, at an exercise price of $45.25 per share, the company said. The warrants can be exercised within seven years of the effective date, the company said. U.S. Bankruptcy Judge Judith K. Fitzgerald scheduled a hearing for July 10 to review a disclosure statement that outlines the plan, the company said. "Reaching this important agreement with our key creditors will enable Owens Corning to move toward emergence from Chapter 11 in a timely manner,'' said Michael H. Thaman, chairman of the board and chief financial officer, in a statement. Owens Corning had record sales in 2005 of $6.32 billion, up 11 percent from the previous year. The head of the Congressional Budget Office told lawmakers Nov. 17 that the total costs of compensating asbestos victims may reach $150 billion. Senators are pushing for the creation of a fund to pay asbestos claimants and free companies from future liability on such claims. Along with Owens Corning, companies such as W.R. Grace & Co., Federal Mogul Corp, USG Corp. and Armstrong World Industries Inc., filed for Chapter 11 protection in Delaware since 2000 to set up plans to wipe out their asbestos liabilities.