Owens Corning officials said 10 June 2004 that it was “unlikely” the company could come out of Chapter 11 bankruptcy in 2004, despite swift action by the judge appointed to take over the case.
After …
Owens Corning officials said 10 June 2004 that it was “unlikely” the company could come out of Chapter 11 bankruptcy in 2004, despite swift action by the judge appointed to take over the case. After a lengthy status conference with Senior U.S. District Judge John P. Fullam, Owens Corning executives said they were very encouraged that Fullam would get the case back on track quickly. But getting a confirmed Chapter 11 plan in place before the end of 2004 seems “unlikely,” said Michael Thaman, Owens Corning“s chairman and chief financial officer. Appointed 27 May 2004 to take over the Chapter 11 case, Fullam faces a challenging set of questions as Owens Corning attempts to apportion USD 5.5 billion to USD 6 billion in equity among contending groups of creditors. The key issue is whether Owens Corning and its subsidiaries should be treated as a single unit for purposes of the Chapter 11 plan. U.S. District Judge Alfred Wolin was at the point of deciding the issue in autumn 2003 when buyers of bank debt filed a recusal motion that eventually led to his removal from the Owens Corning case. Judge Fullam said 10 June 2004 that he had read the Owens Corning trial transcript and briefs and would be ready to issue a decision after reviewing a final set of papers yet to be exchanged by attorneys. Lawyers have suggested a schedule to bring final papers before the court in mid-September. Owens Corning“s Chapter 11 exit plan depends on winning a ruling from Fullam that the company and its units be treated as a single entity for purposes of the bankruptcy proceedings. An agreement announced 9 June 2004 with official representatives of bondholders and trade creditors in the case also depends on the consolidation question. The deal has divided Owens Corning“s major creditors, who had been united in their opposition to the company“s proposed plan on the grounds of its generosity to asbestos-damages claimants. Providing Owens Corning wins on the consolidation question, official representatives of bondholders and trade creditors will be urging their constituencies to support the plan, said Andrew Rahl, attorney for a panel representing those interests in the Chapter 11 case. Buyers of bank debt, who are urging Fullam to split Owens Corning“s units off as separate entities, continue to oppose the plan. They have said consolidation will cost them more than USD 1 billion because it would invalidate loan guarantees negotiated with Owens Corning units. If Fullam rules against Owens Corning and in favor of buyers of bank debt, the progress of the case could suffer another abrupt change. In such an event “there is no agreement, there is no plan at that point,” Rahl said. Owens Corning general counsel Stephen Krull said the company would produce a new Chapter 11 exit strategy if the consolidation ruling goes against it. Fullam questioned lawyers at the status conference over the implications of the consolidation ruling, including the practical effect of splitting Owens Corning“s subsidiaries off from the parent company and allowing holders of significant bank debt to collect against them. Owens Corning attorney Charles Monk told Fullam the parent company“s bank debt would swamp the subsidiaries if a ruling diverted it from the parent company. Even units that have so far stayed out of Chapter 11 might have to file for bankruptcy protection, the lawyer said. The most substantial unit operating outside the Chapter 11 case is IPM Inc., a holding company for international operations, including joint ventures. Thaman said the company would resist placing IPM in Chapter 11 but it may be forced to seek bankruptcy protection if a ruling on consolidation goes against Owen Corning.