As Owens Corning and its creditors prepare for the start of hearings on 5 April 2006 that could lead to the company“s emergence from bankruptcy after six years, Judge Judith Fitzgerald expressed skep…
As Owens Corning and its creditors prepare for the start of hearings on 5 April 2006 that could lead to the company“s emergence from bankruptcy after six years, Judge Judith Fitzgerald expressed skepticism 27 March 2006 about dissident bond-holders“ complaints. She made her comments during a monthly hearing in US Bankruptcy Court in Wilmington, Delaware, where the Chapter 11 case is being heard. Owens Corning has more than USD 10 billion in debts, mostly from asbestos claims. With USD 6.3 billion in annual sales, the firm is the largest US producer of attic and wall insulation. Under the company“s proposed plan of reorganization, most creditor claims will be paid at the rate of USD 0.41 to USD 0.48 on the dollar. Judge Fitzgerald challenged certain legal arguments by Owens Corning bond-holders who are trying to increase their recovery by upsetting loan agreements between the company and its banks, which stand to recover 100% of their claims. The judge also called into question the need for a mini-trial scheduled to be held in US Bankruptcy Court in the bond-holders“ dispute, which centers on repayment guarantees made by Owens Corning subsidiaries to the banks. Instead, she said, it might be more appropriate to take up the issue during a confirmation hearing on the reorganization plan. That multiday hearing is to begin in early July 2006. The bond-holders allege that Judge Fitzgerald should invalidate the repayment guarantees because the subsidiaries are not companies but shells set up by Owens Corning as tax shelters, a characterization disputed by the company. The judge again rebuffed shareholders, whose investments will be cancelled under the reorganization plan. She delayed ruling on their request to try to force a shareholders“ meeting. She said Congress has yet to act on an asbestos-relief bill, the passage of which is the only hope shareholders have for recovering anything. The confirmation process for Owens Corning“s bankruptcy-exit plan, which has the support of asbestos claimants and banks, will open 5 April 2006 with a hearing that will be sent to creditors along with ballots. If a majority of creditors approves the bankruptcy-exit plan, Judge Fitzgerald will open a confirmation hearing 10 July 2006. The plan is subject to approval of both Judge Fitzgerald and US District Judge John Fullam, of Philadelphia. If they approve, the company has said it hopes to emerge from Chapter 11 before 31 December 2006.