Manville May Add $520 Million to Fund for Asbestos Victims : Settlement: It comes as part of a court-ordered restructuring of the $2.5-billion trust, which has received 157,000 claims.
Manville Corp. said Friday that it has agreed to inject as much as $520 million over the next seven years into a cash-strapped, $2.5-billion trust fund set up to pay victims of the asbestos products it once manufactured.
The preliminary agreement marks one step in a restructuring of the fund that has been ordered by a federal judge who also wants a new system for dividing money among the more than 130,00 claimants who have not yet been paid.
“We took one step today, in a process of many, many steps,” said Catherine Carroll-Fischer, a spokeswoman for the trust.
The Manville trust was created two years ago as the Denver concern--once the largest maker of asbestos products--emerged from six years of bankruptcy reorganization. Since then, a flood of claims has nearly depleted the cash reserves of the trust, which was set up to receive its $2.5 billion in assets in payments over the next 24 years.
Even if the new financing plan is accepted by the federal courts, the first payments to the trust would not be made until at least December, 1991. A Manville spokesman, Don Ferguson, said the new financing will be available to the trust only after the courts agree on a new system for settling claims.
U.S. District Court Judge Jack B. Weinstein froze all trust payments July 9 as he called for a claims settlement system that would base payments on the severity of injuries, rather than on how early the claimant filed. Asbestos fibers can cause lung cancer and other respiratory ailments.
Meanwhile, only the sickest and poorest claimants are entitled to disbursements from the fund, which has a balance of about $156 million.
The issue of who is entitled to the money is highly controversial, and the process of devising a new system could take many months, according to lawyers in the case. Some plaintiffs’ attorneys have already indicated that they would appeal any order that changes the method of payment.
The new financing arrangements also depend in part on the company’s success in arranging financing, Ferguson noted. “And, of course, you can never tell about the state of the economy at any moment,” he said.
The new financing agreement was reached by the trust and the company after three months of negotiations. Tom Stephens, Manville’s chairman and chief executive, said in a statement that the deal “sets the framework around which the restructuring can continue.”
Under the plan, Manville would channel money to the trust by making special payments, or distributions, to all of its shareholders. The trust now holds 50% of Manville’s common stock, but the plan calls for conversion of Manville’s preferred stock to common stock--a move that would bump the trust’s holdings to 80% of common shares.
Providing that the new system of settling claims is then in place, an initial payment of $125 million would be made to shareholders on Dec. 1, 1991. Another $125-million payment would come one year later, and two $50-million payments would follow in the third and fourth years of the plan.
From the fourth to the seventh years of the plan, additional distributions will be made, based on the performance of the company, up to a total of $300 million. The distributions could total as much as $650 million, of which the trust would be entitled to 80%, or $520 million.
As part of the plan, Manville has agreed to swap existing Manville bonds held by the trust for new bonds that could be more easily sold for cash. Under the existing financing plan, the trust will be entitled to 20% of Manville’s profits for each year beginning in 1992.
Officials of Manville, which makes building and engineering products, insisted the added payments would not hurt the company’s financial strength. The agreement “is in the best interests of all shareholders,” Stephens said.
So far, the trust has paid out more than $1 billion to settle more than 24,000 claims. Settlements have averaged about $34,000.
