Board Approval Could Ease Emergence From Chapter 11 : Manville Weighs Settling Asbestos Cases

Manville Corp., the giant asbestos maker that filed for bankruptcy law protection from billions of dollars in asbestos claims in August, 1982, said Thursday that it is presenting to its board a plan for possible financial settlement of those claims.

If the board approves the financial package, as is expected, it could become a blueprint for the company’s emergence from Chapter 11.

Some attorneys familiar with the case called the plan a breakthrough in negotiations that have gone on sporadically since Manville’s filed for bankruptcy protection.

The size of the financial package has been estimated at as much as $1.3 billion, including about $600 million from Manville’s insurers and the balance from a fund comprising Manville bonds, stock and operating cash.

Sources say distribution of the money would include $550 million to Manville’s unsecured creditors, including banks and trade creditors, and more than $700 million to victims of asbestos-related diseases.

“This is the first time that Manville has ever agreed on a reasonable financial package to compensate the victims,” said one attorney in the case.

But others cautioned that immense obstacles remain to any complete settlement. Among other problems is Manville’s expected insistence that a financial settlement include provisions barring further asbestos-related lawsuits against the reorganized company.

Estimates of the potential number of victims who are still unaware of their ailments or have not yet filed claims for other reasons range from 30,000 to 2 million, said George Rosenberg, a Los Angeles lawyer representing about 800 claimants.

Rosenberg contended that any limitation on new lawsuits would improperly infringe on victims’ rights. “No one has any idea what the potential cost could be,” he said. “If they guess, and they guess wrong, then the money would run out before every victim is paid.”

Other attorneys close to the negotiations cautioned that literally hundreds of details need to be worked out before any settlement is final. “This is the very beginning, not hardly the end,” said one attorney.

Manville, in a statement released from its Denver headquarters, confirmed that “senior management and the legal representative for future claimants have agreed on principal elements of a plan of reorganization.” The reference is to New York attorney Leon Silverman, who proposed key elements of the financial plan. Manville said it would not disclose details of the proposal until today at the earliest.

Sources said the breakthrough came in part after four court-appointed committees of litigants threatened to announce last Monday that they had agreed to a settlement plan and would pursue it with or without Manville’s cooperation. The committees represent victims, unsecured creditors, equity shareholders and Manville’s co-defendants in asbestos cases around the country.

At the same time, sources said, Manville faced pressure from Bankruptcy Judge Burton R. Lifland, who is supervising the case in bankruptcy court here and threatened to block some Manville corporate projects unless there was negotiating progress.

“The court was prepared to not let Manville do business as usual,” one attorney said.

All parties are due back before Judge Lifland on Monday for a report on the talks.