PITTSBURGH - After a four-hour hearing yesterday, a bankruptcy court judge signaled that she is ready to sign off on Owens Corning's Chapter 11 exit plan.
"Congratulations," Judge Judith Fitzgerald told company lawyers and creditors.
She made the comment shortly after dismissing the second of just two remaining objections to the Toledo Fortune 500 company's plan for distributing $8.6 billion in cash and stock to thousands of asbestos victims and other creditors.
It was a crucial moment in OC's six-year bankruptcy odyssey.
While the judge didn't indicate when she will officially "confirm" the so-called plan of reorganization, all sides anticipate quick action.
The company and its lawyers are racing against the clock to avoid a $30 million penalty in connection with financing arrangements if it fails to exit Chapter 11 by Oct. 31.
"What happened today made me very confident about that date," Owens' Chief Executive Dave Brown said in a telephone interview.
The CEO of the building-products maker in downtown Toledo monitored the hearing in U.S. Bankruptcy Court in Pittsburgh by telephone link from the firm's headquarters.
"We think it's an important day for our company," he said. "It's an important next step in our emergence from bankruptcy."
Once Judge Fitzgerald approves the plan, a U.S. District judge in Philadelphia will consider whether to sign off.
Before OC can exit Chapter 11, however, it must then wait 30 days to give creditors a chance to object. Even if objections are filed, the firm would likely take court action to try to prevent a delay, bankruptcy experts said.
Banks will receive full recovery under the plan and other creditors will receive between 49 cents and 58 cents for each dollar owed. Existing stock will be canceled, but shareholders will get an opportunity to buy new shares at pre-determined prices.
The hearing was held just days after the company reported that 99 percent of ballots cast by or on behalf of 600,000 asbestos-injury claimants favored the plan.
Officials had earlier announced that other creditors had voted for the plan by lopsided margins.
In contrast to frequently contentious past hearings, there was a relaxed atmosphere at the court session in the U.S. Steel office tower in downtown Pittsburgh. At the start, lawyers who were formerly adversaries smiled and shook hands.
OC filed Chapter 11 in Wilmington, Del., where it is chartered, but the hearing was held in Pittsburgh to accommodate the judge who is from that city.
Norman Pernick, OC's top outside bankruptcy lawyer, immediately announced that 17 of 19 parties who had filed objections to the plan, including the U.S. trustee's office in Philadelphia, the U.S. Department of Labor, and the Internal Revenue Service, had dropped their opposition. Settlements required slight modifications to the plan, but no major changes, he said.
Another complaint was withdrawn during the hearing.
Later, Judge Fitzgerald overruled the objections of the family of an asbestos worker who died in 1981 from asbestos cancer. The man's daughters, by telephone, tearfully described how his health was destroyed by years of inhaling fibers from asbestos insulation once made by Owens Corning.
"Dad came home covered with white dust," one daughter said. In the end, he slipped from 195 pounds to 85 pounds. "You could stand by his bed and hear the death rattle in his chest," the daughter added.
Judge Fitzgerald told the women that they will likely be entitled to compensation from a personal injury trust that will be set up with $5 billion in cash and stock by Owens Corning to pay claims, but that it would be unfair to handle their case differently from those of other asbestos victims.
The judge also overruled an objection raised by the owner of bonds issued by Owens Corning in Europe in 1985. The bond-holder unsuccessfully argued that the wording of the bond offering entitled him to special consideration.
Owens Corning legal chief Stephen Krull, who was flanked by Michael Thaman, company chairman and chief financial officer, told creditors and the judge that the firm's top goal when it filed Chapter 11 was to develop a reorganization plan that would put the firm on sound financial footing and that would be fair to asbestos victims and other creditors.
"It's been a long road getting here," Mr. Krull said.
He praised the dedication and loyalty of the firm's 18,000 employees worldwide.
"Six years is a long time," Judge Fitzgerald replied. "I'm very pleased with the fact you are coming out when you are ..."
The company filed for bankruptcy protection on Oct. 5, 2000, because of mounting asbestos-liability claims. Asbestos, which was in products the firm made until the early 1970s, can cause health problems.
The company, Toledo's third largest, reported $7 billion in assets and $5.7 billion in liabilities at the time, making it the city's largest ever bankruptcy.
Mr. Krull told The Blade after the hearing that the firm is on track to meet a goal of exiting Chapter 11 by Oct. 31. If it fails to do so, the firm must pay $30 million to extend until Dec. 15 a stock underwriting agreement with New York investment banker J.P. Morgan.
Contact Gary T. Pakulski at:
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