NEW ORLEANS -The Babcock & Wilcox unit of McDermott International Inc. has won court approval of its plan to emerge from bankruptcy by putting assets worth about $1.8 billion into a trust to pay more than 222,000 asbestos-injury claims.
Babcock & Wilcox, one of the world's largest makers of steam generators, used asbestos in products until the mid-1970s.
The trust follows a model established in the bankruptcy of Johns- Manville Corp., which paid workers more than $2.7 billion in a settlement that became part of U.S. bankruptcy law.
Under the proposal, all shares of Babcock & Wilcox, with an estimated worth of $400 million to $500 million, and insurance rights valued at as much as $1.15 billion would be put into a trust for asbestos-injury claimants.
New Orleans-based McDermott will contribute 4.8 million shares and a $92 million note as part of a related settlement.
"This case has already lasted too long; the professional fees and expenses have already been far too costly - $85,666,633," U.S. Bankruptcy Judge Jerry Brown in New Orleans wrote in a 106-page ruling. "The time has come to move this case forward."
Judge Brown's action moves Babcock & Wilcox closer to ending its stay in bankruptcy after four years and eight months. The plan is subject to approval of a U.S. district judge.
The company doesn't have a target date to exit bankruptcy because of potential appeals by creditors, McDermott spokesman Jay Roueche said. McDermott supports a national asbestos trust that would make such trusts by individual companies unnecessary.
"We believe a legislative solution is clearly superior to a litigious system," Mr. Roueche said. The company has written off its investment in Babcock & Wilcox, he said.
Some asbestos victims who qualify for payment will get anywhere from $10,000 to $90,000, depending on the severity of their illness, court papers show. Some insurance companies that issued polices to the company, including Travelers Insurance Co. and American International Group Inc., have agreed to pay into the trust.
Other insurance companies fought the plan and the extent of their liability will be dealt with in a separate legal proceeding, according to Judge Brown's ruling.
Babcock & Wilcox filed for bankruptcy in February, 2000, citing the expense of asbestos-injury lawsuits. The company and its insurers spent more than $1.6 billion to resolve more than 300,000 asbestos claims before the bankruptcy filing.
Babcock & Wilcox made equipment used in the nuclear reactors at the Three-Mile Island power plant near Harrisburg, Pa. One of the reactors experienced a partial meltdown in 1979.
More than 70 U.S. public companies, including Toledo's Owens Corning, have filed for bankruptcy due to asbestos liabilities since Manville filed in 1982. Congress is debating proposals for a national trust fund for victims of exposure to asbestos, a fibrous material widely used for fireproofing until the mid-1970s.
Long-term exposure to asbestos can cause lung ailments, including a rare and particularly lethal form of cancer known as mesothelioma.