Mesothelioma Lawyer - Article - USG Agrees to Pay $4 Billion to Settle Asbestos Claims
Posted on Jan 31, 2006 | Associated Press
USG Agrees to Pay $4 Billion to Settle Asbestos Claims
Mike Colias
USG Corp. said Monday it expects to emerge from 4 1/2 years in bankruptcy sometime this summer after the world's largest manufacturer of wallboard agreed to settle its asbestos-related lawsuits.
The Chicago-based company's stock leapt $15.59, or 19.5 percent, to $95.44 in afternoon trading Monday on the New York Stock Exchange -- its highest level since the early 1990s. The stock traded around $4 in June 2001, when heavy asbestos litigation costs forced USG into Chapter 11.
The agreement calls for USG to pay $900 million in cash into a new trust to handle present and future asbestos personal-injury claims. It would pay another $3.05 billion to the trust through a contingent note.
However, that payment would be canceled if Congress passes legislation creating a national asbestos personal-injury trust fund. The U.S. Senate is expected to take up that measure next week.
But the deal signals that USG and other companies exposed to asbestos litigation aren't holding out much hope for the bill, said Jeff Cooper, managing partner at SimmonsCooper in Chicago . The firm represents victims of asbestos-related mesothelioma.
"The bill is a real long shot at this point," Cooper said. He added that the USG settlement "looks like a fair deal for victims ... and for USG."
The Senate bill would establish a $140 billion trust fund with contributions from corporate defendants and their insurers to compensate victims of asbestos exposure. In exchange, courts would be prohibited from hearing new lawsuits from asbestos victims, sparing companies from large awards that could bankrupt them.
USG officials said the proposed settlement will be included in a plan of reorganization and disclosure statement they expect to file with bankruptcy court next month. The documents will outline its plan to leave bankruptcy by July following court approval.
The plan calls for the company to fully repay debt holders and suppliers with interest.
"This agreement will allow us to keep our promises to provide compensation to those who have been injured, to repay our unsecured creditors in cash with interest and to reward our shareholders," USG Chairman and CEO William Foote said during a conference call Monday.
Financing for the contingent note would come from tax refunds, new long-term debt and a $1.8 billion rights offering to existing stockholders, backed by Warren Buffett's Berkshire Hathaway Inc. USG officials said Hathaway would acquire any shares not purchased by USG shareholders.
USG, which has seen its shares surge even in bankruptcy thanks to a booming housing market, also on Monday reported a fourth-quarter loss of $1.78 billion, or $39.94 a share, on sales of $1.34 billion. Results include an after-tax charge of $1.9 billion, or $43.39 per share, to settle asbestos personal injury liability.
Excluding those costs, fourth-quarter 2005 net earnings were $165 million and earnings per share were $3.70.
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