T&N Creditors Meet in London
Against a backdrop of public protest, creditors of T&N Ltd. and 13 of its associated companies1 met inside the Queen Elizabeth II Conference Centre in London on 11 February, 2002 to consider proposals made by representatives of Kroll Buchler Phillips (KBP), the firm appointed to administer the companies’ affairs during the financial restructuring process. Few of the 10,000 eligible creditors attended leaving those present scattered throughout the large hall.
The main presentation was given from the lectern by Simon Freakley, the head of the three-man court-appointed team of administrators. He said that during the first few months of administration, KBP had focused on stabilising the ongoing businesses of the FM/T&N Group (the Group). This work was complicated by the difficult trading conditions in the automotive parts industry currently. As the Group is under pressure to reduce prices, the administrators have been working with the companies to continue efficiency gains.
According to Freakley, the administrators are "acutely aware of the human tragedy" of asbestos-related diseases and are sensitive to the needs of claimants. He expressed a wish to work with and support the claimants. The rights of all non-secured creditors are equal; thus, an asbestos claimant has the same right as a trade creditor. Among the asbestos claimants, someone whose exposure was environmental (e.g. someone from Armley, Leeds) has the same rights as someone who had been employed by one of the T&N subsidiaries. There were 300,000 asbestos claims pending as of 30 June, 2001 against the FM Group. The vast majority of them were US claims; many of them were against the T&N companies: Newalls Insulation, J. W. Roberts, T&N Shelf Twenty-Six (Tenmat), TBA and T&N Ltd. It has been estimated that the total asbestos liability of the Group is $1.6 bn.
T&N’s insurance situation is complex. There are specialists working to detail the insurance coverage of the various T&N subsidiaries. Freakley said that a document would be issued on 15 February, 20022 which details the insurance polices located by the administrators. This document has been prepared under a court order in the case of Mr. "L" vs. Newalls Insulation Co. Ltd. Although the case was brought in the Queen’s Bench division of the Newcastle-upon-Tyne District Registry, the issuing of the administration order of 1 October, 2001 by the High Court of Justice, Chancery Division in London meant that an application for insurance information had to go before the London Court. A similar report will be used in the coming weeks to comply with other court orders. According to Freakley, the reason the administrators have not been able to discuss insurance issues until now is that solicitors have advised that any public statements on insurance could jeopardise the viability of the policies. The administrators need to preserve the value of these policies so claims can be made.
Mark Andrews, a solicitor who represents the administrators, confirmed the following about T&N’s insurance:
T&N had Public Liability insurance but it was by now probably exhausted;
T&N had several Employers' Liability policies after 1969. From 1969-1977, there was Employers' Liability cover with the Royal Insurance Company Ltd. From 1977-1995, there was Employers' Liability cover with Lloyd’s of London. A copy of the policies will be attached to the report released on 15 February.
In 1996, a £500m asbestos liability insurance policy was taken out with the Curzon, T&N’s captive insurance vehicle. The insurance will be triggered should the aggregate cost of claims made or brought after 30 June 1996, where the exposure occurred prior to that date, exceed £690m."
Andrews said: "It was not appropriate for administrators to make a statement about the cover…. The administrators wish to be candid with all creditors and are unhappy about not being able to be candid on this." If the administrators’ enquiries on this policy are not satisfied soon, they will use a summary process to get more information. The goal is to ensure that the insurance and reinsurance coverage is not prejudiced by precipitous action.
Several questions were asked following Andrew’s presentation. Laurie Kazan-Allen asked: "If this is truly a global reorganisation of the FM/T&N Group, does this mean that a 51 year old American mesothelioma claimant will receive the same level of compensation as a similar claimant in the UK?" Andrews responded that it was too early to predict the structure of the global reorganisation. There are two possibilities:
all claims could be treated equally: equal payouts for equal diseases;
claimants could be dealt with by jurisdiction: so an English claimant would get the appropriate figure in the UK, while an American claimant would get what is appropriate in the US
The second part of Laurie Kazan-Allen’s question stressed the timescale of the reorganisation process, pointing out that in the US various asbestos defendants had taken anywhere from 3 to 13 years to reorganise. Mesothelioma claimants do not have the luxury of time to wait out this process. Simon Freakley admitted that because of the sheer magnitude of the work required, the reorganisation is bound to take a "number of years." This is why, he said, his team are trying to see what the position is with the insurance policies. In addition, the administrators have been speaking to representatives in various departments of the government, including The Treasury, to see what government compensation schemes might be available.
Under Section 11 of The Insolvency Act, the administrator is empowered to relax the judicial stay on bringing cases if necessary. This has already been done in a couple of cases to ensure claims will not be time-barred. Freakley said if there is a genuine reason to relax the stay, "the administrators don’t have a closed mind." A question was a asked about whether claims could proceed to judgment or settlement; administrators will reflect on this question.
During the discussion, general points were made about the different legal powers of creditors’ committees in the US and UK. US creditors’ committees have legally enforceable powers; their advice cannot be ignored by those planning a company’s reorganisation. Under Chapter 11, it is possible to set up more than one committee. There are two US FM creditors’ committees: one representing asbestos claimants and one representing commercial creditors. Each committee has 10 members. Under UK law, creditors’ committees only have an advisory role. Freakley said the committee was a sounding board; its input to the heart of the administrative process was very influential. When pushed, he admitted, however, that the advice of the committee could be ignored. The committee did have one significant power: that is, to review and approve/disapprove the administrators’ remuneration.
The meeting proceeded with votes on procedural matters. When the matter of the composition of the UK creditors’ committees was reached, creditors requested a brief adjournment to discuss the administrators’ proposals. Under UK law, the committee has to have a minimum of 3 and a maximum of 5 members. The recommended panel for the T&N Ltd. creditors’ committee included 3 US lawyers, 1 trade creditor and 1 UK solicitor. There was a consensus amongst those representing UK asbestos claimants that it would be preferable to include an additional UK voice amongst the members of this committee. A compromise was reached whereby there would be two non-voting co-opted members of the T&N Ltd. committee: Joe Rice, from the Ness, Motley law firm in South Carolina and Bozena Michalowska, a solicitor from Leigh, Day who is representing the Swaziland claims arising from the Havelock mine. The administrator agreed to this proposal.
The T&N Ltd. committee was constituted as follows (* full voting member):
*Joe Rice, Ness, Motley et al, South Carolina, US (representing Foster Kane, an unimpaired victim);
Joe Rice, Ness, Motley (representing Bobby Shirley, an impaired victim);
*Steven Kazan, Kazan, McClain et al, California, US (representing mesothelioma plaintiff);
*Anthony Coombs, John Pickering and Partners, Manchester;
*HSBC - a trade creditor;
*Frank Maguire, Thompsons Solicitors, Glasgow;
Bozena Michalowska, Leigh, Day, London.
The other Creditors’ Committees were constituted as follows:
Newalls Insulation Co. Ltd.
*Frank Maguire, Thompsons Solicitors, Glasgow;
*Ian McFall, Thompsons Solicitors, Newcastle;
*Paul Johnson, Pannone, Napier, Manchester;
*Peter Williams, Field, Fisher, Waterhouse, London;
*Anthony Coombs, John Pickering and Partners, Manchester.
J. W. Roberts Co. Ltd
*Anthony Coombs, John Pickering and Partners, Manchester;
*Frank Maguire, Thompsons Solicitors, Glasgow;
*Ian McFall, Thompsons Solicitors, Newcastle;
*Adrian Budgen, Irwin Mitchell, Sheffield.
T&N Shelf Twenty-Six Ltd.
*Anthony Coombs, John Pickering & Partners, Manchester;
*Steven Kazan, Kazan, McClain et al, California, U.S;
*Ian McFall, Thompsons Solicitors, Newcastle;
*Paul Johnson, Pannone, Napier, Manchester;
*Sinead Cartwright, UK Solicitor.
February 12, 2002
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1 Plans under consideration were for the following companies:
|
T&N Limited |
J. W. Roberts Limited |
|
Federal-Mogul Shoreham Limited |
Hepworth & Grandage Limited |
|
A E Piston Products Limited |
Fleetside Investments Limited |
|
T&N Shelf twenty-Six Limited |
Edmunds Walker & Co. Limited |
|
T&N Shelf Twenty-Five Limited |
Turner Brothers Asbestos Co. Limited |
|
T&N Shelf Twenty Limited |
TAF International Limited |
|
TBA Belting |
Newalls Insulation Company Limited |
2 Copies of the report will be circulated to members of the FM/ T&N Creditors' Committees.
