Congoleum Chapter 11 Exit Plan Irks Insurers
Wall Street Journal - Congoleum Corporation has been battling insurance companies for years in bankruptcy court and the company's plan to exit Chapter 11 protection is being met with objection by insurers.
CNA Financial Corp., Travelers Companies. and Employers Insurance Co. of Wausau are part of more than a dozen insurance companies balking at provisions in the plan that, they purport, don't conform to bankruptcy law. The plan, among other things, unfairly favors some asbestos claimants according to insurers.
More than 100,000 asbestos-related personal-injury claims have been filed against Congoleum. The company, based in Mercerville, N.J., sued several of its insurers, including Travelers, ACE Group's ACE American Insurance Co. and CNA for failure to cover asbestos claims.
Settlements over coverage have been reached with some insurers by the company. It has been proposed that money to cover asbestos liabilities be put into a trust.
U.S. Bankruptcy Court judge in Trenton, New Jersey, Kathryn C. Ferguson, has arranged a meeting to discuss objections by insurers.
The Congoleum plan involves creating a trust that will be funded by insurance proceeds to compensate those injured by the company's asbestos-laden floor tiles by paying their claims.
Since filing for bankruptcy over four years ago, Congoleum has proposed twelve reorganization plans. The latest plan is backed by the committees representing asbestos victims and bondholders, as well as those individuals who have yet to become ill but have been exposed to Congoleum asbestos-laden floor tiles.
Under this current plan, a 50.1% stake in the reorganized Congoleum Company would be placed in an asbestos trust. In addition, $167 million pledged by several insurance companies under various settlements would also be taken in by the trust.
Around $100 million is owed to bondholders and they would receive a combination of stocks and bonds in the reorganized company. American Biltrite Inc., the controlling shareholder, wouldn't recover anything for its stake and existing shares in Congoleum would be canceled.
In an effort to shield its assets by directing asbestos claims into a trust to be set up under a Chapter 11 plan, Congoleum filed for bankruptcy in 2003. A "prepackaged" bankruptcy plan was not approved by Judge Ferguson, who said that it wasn't compliant with bankruptcy law.
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