Federal Mogul's New Offer to (UK?) Creditors
Steve Miller, CEO of Federal-Mogul (FM), the parent company of T&N Ltd., was in London this week with other FM personnel to sell the company's latest deal to T&N's UK administrators (Kroll Buchler Phillips), the independent trustee of T&N's pension fund (Alexander Forbes Pension Services), trade unionists and MPs. Rumors of a secret Westminster meeting began to circulate on October 15th. Despite enquiries to Kroll and their lawyers, information about this event remained unobtainable. Confirmation of the Parliamentary briefing came in a comment made by MP Geoffrey Robinson (Coventry, North-West) during a debate on Pensions Scheme (Federal-Mogul) in Westminster Hall, House of Commons on Tuesday (October 19) afternoon; at 4:10 p.m. Robinson asked:
Is my hon. Friend aware that we have just come from a meeting, where, I am pleased to say, the administrator and the trustee spoke robustly in defence of British interests, which are also before the court this week.1
In her statement, Minister for Work and Pensions, Rt Hon Jane Kennedy MP said:
negotiations are still ongoing at Turner and Newall. We heard that a meeting upstairs between the chief executive of Federal-Mogul and representatives of the company and its employees will be listening carefully to what is said in this debate.
A trade unionist who had attended the closed meeting estimated that the session, which took place at 2 p.m. in Westminster, attracted 60 participants; in an attempt to restrict the dissemination of confidential information, FM made available only 10 copies of a three page document marked CONFIDENTIAL. The Term Sheet, as it is designated, outlines a proposal by the Plan Proponents to solve T&N's pension crisis and settle UK and ROW (rest-of-the-world) asbestos claims against T&N, thereby ensuring the continued coordination of these cross border plenary insolvency proceedings.
Some MPs were optimistic. MP Alice Mahon (Halifax) told the House: there has been some hopeful news, and a rescue package could be on the cards. MP Robinson agreed:
it seems that the clock will go right back to when chapter 11 was invoked, and that despite all that has happened in between - even redundancies now being discussed in the constituency of one of our other hon. Friends - arrangements will be honoured in full as though the receivership or chapter 11 had never happened
Other Parliamentarians, such as Michael Clapham, Chairperson of the Asbestos Sub-Committee of the House of Commons, remained sceptical:
I am advised by the administrator that the people who have been exposed to asbestos by Turner and Newall may receive in compensation only a small proportion of the full value of their claims.
Seasoned US and UK observers of the FM/TN reorganization process also expressed reservations about the confidential proposal circulated at the October 19 meeting alleging that it raised more questions than it answered. Casting doubt on the company's insistence on the inflexibility of the December, 2004 court deadline, it was pointed out that bankruptcy proceedings are frequently adjourned to give parties more time for negotiations. Three days after the London foray, FM will ask the U.S. Bankruptcy Judge Raymond T. Lyons for permission to borrow up to $1.93 billion to fund its reorganization strategy.2 At about the same time, a judge in the London High Court is expected to rule on the administrator's application for guidance. In a separate action, the independent trustee has also sought judicial advice on alternatives.3 It remains to be seen how the latest proposals will affect the on-going court actions in the UK.
On October 21, Radio 4's flagship news program Today, carried a segment about the recent FM/T&N developments. Reporter Nicola Stanbridge interviewed Lydia Garner, whose grandfather, a senior foreman at T&N's asbestos factory in Armley, died of an asbestos-related disease. Lydia's father, Ken Hall, died of mesothelioma after domestic and environmental exposure to T&N asbestos. Ms. Garner said that compensation was only part of the problem; somebody has to be held accountable for the human tragedies caused by asbestos. The proposed Asbestos Subfund which will be contained within the T&N Worldwide Fund has no provision for compensating UK citizens who contract asbestos-related diseases after domestic or environmental exposure; this omission would leave women who had washed their husbands' asbestos-contaminated workclothes and people who had lived or worked in proximity to T&N asbestos factories with no legal remedy. Bringing the radio piece to its conclusion, MP Clapham said The new deal isn't as good as it could have been the worldwide pot just won't be sufficient. Federal-Mogul and the UK administrators of T&N declined to be interviewed.
October 21, 2004
2 Jeff St. Onge. Federal-Mogul hopes to borrow $1.9B. Accessed October 21, 2004: http://www.detnews.com/2004/autosinsider/0410/07/c02-293626.htm