22 March 2005 – Swiss-based engineering group ABB announced Monday that it has reached agreement on a reorganization of two of its subsidiaries which would resolve outstanding asbestos claims on both companies but which will involve setting aside an additional $232m.
ABB’s financial position has been undermined for a number of years due to the unquantifiable nature of the liabilities arising from asbestos within the group. The agreement aims to lift the uncertainty overhanging the company.
ABB has agreed on a term sheet that will form the basis for an amended plan of reorganization for Combustion Engineering (CE) and ABB Lummus Global to resolve the asbestos claims of both companies.
The term sheet is the result of recent intensive discussions between the company and the representatives of asbestos claimants and has been agreed to by Steven Kazan, the representative of certain cancer claimants, John Cooney and the official creditors committee of CE and other leading representatives of asbestos claimants, as well as David Austern, the futures’ representative of the CE asbestos trust.
“I am pleased that the cooperative efforts of the parties involved have resulted in a commonly agreed proposal for an amended plan in this short period of time,” said Fred Kindle, ABB President and CEO. “This agreement is a vital step towards a final resolution of our asbestos issue.”
All parties to the term sheet believe the amended plan of reorganization will fully address the issues raised in the 3rd Circuit Court of Appeals decision of last December as well as the objections raised by certain asbestos claimants to the original plan.
The term sheet requires ABB to contribute an additional fixed amount of $232m to the trust fund. This contribution will be derived from the sale of ABB Lummus Global assets within two years of the plan’s effective date or by a direct contribution from ABB.
The parties intend to cooperate to produce an amended plan of reorganization expeditiously, with a view to prompt confirmation by the bankruptcy court. Given the subsequent nature of this event, ABB will revise its already published financial results for 2004 to incorporate the full impact of this amended plan.