Owens Corning creditors seek to recover asbestos settlements

Owens Corning“s unsecured creditors committee is seeking to bring lawsuits designed to recover hundreds of millions of dollars the company paid under an asbestos claims settlement programme.
The com…

Owens Corning“s unsecured creditors committee is seeking to bring lawsuits designed to recover hundreds of millions of dollars the company paid under an asbestos claims settlement programme. The committee would seek to void transfers the company made to claimants and their law firms, as well as to its own officers and directors, during the period preceding its Chapter 11 filing almost two years ago, according to papers filed with the US Bankruptcy Court in Wilmington, Delaware. The committee said Owens Corning has refused to bring these suits, and it would like to do so in the company“s place. The suits had to be filed by 4 October. A hearing on the committee“s request to bring the suits was scheduled for 24 September. The committee seeks to bring five suits, all of which it says are related to an asbestos settlement programme the company joined in late 1998 to try to settle asbestos liabilities that two years later drove it into Chapter 11. The liabilities were related to asbestos-containing products allegedly made, sold or installed by the company or one of its subsidiaries. Exposure to asbestos, a fire-retardant material, can lead to the development of fatal respiratory diseases, although frequently not until decades later. The committee said in court papers that Owens Corning paid hundreds of millions of dollars into the settlement programme even as it knew it would be filing for bankruptcy. Company management did so, the committee said, in hopes to win favour with the people who would control their employment and remuneration once the bankruptcy had been filed. Management knew that under Section 524(g) of the Bankruptcy Code, the asbestos plaintiffs“ law firms would in effect control the company“s voting stock after its reorganization. The committee would seek to recover $700 million in cash transferred into the accounts of some of the law firms; funds transferred under agreements reached after Jan. 1, 2000, and those reached earlier but converted or accelerated because of the company“s financial crisis; US$ 115.2 million in transfers made to asbestos claimants and their law firms in the 90 days preceding the bankruptcy filing; and US$ 290 million in transfers made to some of the law firms and their clients between March 2000 and the bankruptcy filing date.