Federal-Mogul Corporation has filed for Chapter 11 protection in order to separate the ongoing asbestos liability claims from the company’s operations.
The company and its United States subsidiaries have voluntarily filed for financial restructuring under Chapter 11 of the U.S Bankruptcy Code. In addition, Federal-Mogul subsidiaries in the United Kingdom have filed jointly for Chapter 11 and Administration under the U.K. Insolvency Act of 1986.
No company subsidiaries outside of the United States and the United Kingdom are included in these filings.
The filings, made today in the U.S. Bankruptcy Court in Wilmington, Delaware, and the High Court of Justice, Chancery Division, London, England, enable Federal-Mogul to develop a plan to resolve its asbestos liabilities. During these restructuring proceedings, Federal-Mogul will continue business operations without interruption, and with the full support of its major customers and suppliers.
"Moving forward, Federal-Mogul will continue to serve its existing customers, fulfill current contracts and secure new business," said Federal-Mogul chairman and chief executive officer Frank Macher. "I have been in close contact with many of our major customers and suppliers, who have indicated that they will support Federal-Mogul during the restructuring process."
No Federal-Mogul job losses or facility closures are expected as a direct result of the filings. The company expects its employees worldwide will continue to be paid in the normal manner and that their benefits will not be disrupted. Federal-Mogul’s qualified U.S. and U.K. pension plans for retirees are protected by law.
"Today’s action provides a means for effectively separating our company’s acquired asbestos liabilities from our true operating potential, thus paving the way for Federal-Mogul to emerge from the reorganization process as a stronger, more competitive enterprise," Macher added. "We remain committed in our efforts to bring about a legislative solution for managing asbestos claims."
Federal-Mogul is one of more than 30 companies involved in asbestos-related litigation to voluntarily file for Chapter 11 since 1982. Ten companies involved in asbestos-related litigation have filed since January 1, 2000. In the United Kingdom, the Administration Order is a court order placing Federal-Mogul’s U.K. businesses under the control of a court-appointed administrator. The order is intended to preserve the company’s business and allow a reorganization of its assets while protecting it from actions by creditors and asbestos claimants. While these filings are independent of the U.S., every effort is being made to maintain a mutual goal of reorganization.
Federal-Mogul intends to work closely with asbestos claimants and other creditors to develop a financial reorganization plan that will address asbestos claims and establish a viable capital structure for the long-term growth and profitability of the company’s operations. In conjunction with the filings, Federal-Mogul has obtained commitments of up to $675 million in a new loan through debtor-in-possession financing from a group of banks led by J.P. Morgan Chase & Co. Following the U.S. Court’s approval, Federal-Mogul can use these funds to meet the future needs and obligations associated with normal business operations. This includes payment under normal terms to suppliers and vendors for all goods and services that are provided after today’s filing.
"After vigorously working for a legislative solution and operating nine months with our new litigation approach for managing asbestos claims, we have determined that the Chapter 11 and Administration processes are the only way we can effectively structure payments for claimants without financially crippling the operations of Federal-Mogul. This voluntary, but difficult, decision to file enables us to continue our operations with the same high level of commitment to our product quality and innovative technologies required to competitively serve our customers," said Macher.
Have your say: