Struggling industrial engineering group ABB yesterday said it planned to make a written proposal before the end of the year to claimants in a key asbestos liability case for a US subsidiary.
The Swiss-based ABB is trying to obtain a "pre-packed" deal to file for Chapter 11 court protection for the unit Combustion Engineering Inc. It has offered to pay plaintiffs €288 million over several years on top of the unit's assets of some €768 million.
"We are working to send out a written proposal to the claimants before the end of this year," an ABB spokesman said. "This keeps the plan for a pre-packed Chapter 11 filing on track," he added.
The settlement deal - which envisions transferring the assets of Combustion Engineering to a special trust for the claimants while ABB would be freed from any further court cases - is a crucial element for the ailing group to return to financial stability and would remove uncertainty from its stock.
The plaintiffs are former workers and clients who claim they became ill by inhaling asbestos particles released in the manufacturing of boilers and insulation material. ABB, once the European challenger to General Electric, is selling assets to reduce a heavy debt load of more than €8.65 billion.
Chairman and chief executive Mr Jürgen Dormann is refocusing the group on power technology and automation products.
Settling the asbestos liability case is also a condition to a fresh $1.5 billion (€1.4 billion) two-year finance deal agreed with 20 banks earlier this month.
ABB shares have dropped 73 per cent so far this year and lost another 3 per cent yesterday in the wake of last week's debt downgrade by Moody's Investor Service. Moody's cut ABB's senior unsecured debt ratings by two notches to "B1", its fourth-highest junk rating, from "Ba2" with a negative outlook.
It was Moody's third rating cut on ABB in less than two months.
The rating cut came after ABB signed a €1.44 billion credit facility last week with lender banks, which will cover the company's liquidity needs for 2003 and 2004. Chapter 11 is part of the US bankruptcy code and provides protection from creditors while a company is being restructured.
ABB in October said it could put Combustion Engineering under Chapter 11 because the unit's liabilities exceeded its assets. In November it started negotiations with the plaintiffs.
ABB is represented by Chicago-based law firm Kirkland & Ellis. The Combustion Engineering case is one of several high-profile asbestos settlement negotiations involving key US firms, such as Honeywell and Halliburton.
US legal sources said ABB had a good chance of persuading the Combustion Engineering plaintiffs to accept the deal on the table, given that rejection risked financial failure and the plaintiffs may get much less and have to wait longer in any protracted court settlement.They added that speculation of pending US legislation to put a cap on asbestos litigation was an added incentive to plaintiffs to reach a deal before such laws came into force.- (Reuters)
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