Bankruptcy court approves Pittsburgh Corning plan
July 2013 | DEALFRONT | BANKRUPTCY & RESTRUCTURING
Financier Worldwide Magazine
With its reorganisation plan approved by US bankruptcy Judge Judith Fitzgerald, the Pittsburgh Corning Corporation moved one step closer to emerging from bankruptcy in May, more than 13 years after the companyfiled for Chapter 11 protection.
The plan calls for the creation of a $3.5bn trust to resolve the thousands of outstanding asbestos related claims that pushed the company into bankruptcy in April 2000. Glass maker Pittsburgh Corning filed for bankruptcy as a swathe of personal injury litigations began to mount up against it. The vast majority of the personal injury cases were related to Unibestos, a pipe insulation product Pittsburgh Corning produced between 1964 and 1972 at several of its plants, including those inTyler, Texas, and Port Allegany, Pennsylvania. The Texas plant was closed by the Occupational Safety and Health Administration in 1972 after it was reported to be “extremely hazardous”.
Before filing for bankruptcy the company had resolved around 200,000 of the approximately 435,000 claims registered against it. Pittsburgh Corning noted in 2000 that settling any remaining cases could significantly deplete its assets.Although the finalised plan drew objections from a number of the insurance companies involved in the case, most notably the Mt McKinley Insurance Co., Judge Fitzgerald remained unmoved.
The $3.5bn trust will be funded by PPG Industries and Corning Inc., which each own 50 percent of the Pittsburgh Corning joint venture, and the insurance companies. PPG noted in a statement that under the terms of the plan, all current and future personal injury claims against PPG relating to exposure to products containing asbestos manufactured, distributed or sold by Pittsburgh Corning will be directed to the trust for resolution.
Under the terms of the plan, PPG agreed to pay around $825m to the trust in accordance with a fixed payment schedule ending in 2023, as well as 1.4 million shares of PPG stock or the cash equivalent. PPG will also be required to surrender its stake in Pittsburgh Corning Europe. Corning will be required to contribute $290m to the trust. Insurers acting on behalf of the two firms will be liable for the remaining $1.7bn. The insurers’ contributions will be made via a series of payments ending in 2027.
The plan is still subject to appeals and approval by the US District Court and it is likely that the insurance companies acting for Pittsburgh Corning will exercise that appeal right before the plan is given final approval by the District Court. In light of this likely appeal, the parties who brought asbestos related claims against Pittsburgh Corning will have to wait even longer for payments, which are expected to cover about 37 percent of their claims.
Pittsburgh Corning’s chairman and chief executive Phillip Martineau heralded the decision as a “turning point” in the company’s long and storied bankruptcy saga. Mr Martineau also noted that the trust “is intended to help support the people and families who were harmed by asbestos”. He also stated that “other than having different owners” the company’s day to day activities will not be adversely affected by the reorganisation plan. Post bankruptcy the company will continue to operate with a new board of directors, although Mr Martineau will continue as chairman. He noted that Pittsburgh Corning was “very private” and had been since the company was established in 1937. Mr Martineau also added “Part of our private nature is due to the legal restrictions we have in Chapter 11. We are highly profitable and growing. We are absolutely a success story that’s underneath the radar in Pittsburgh.”
PPG Industries, which was founded in 1883, has its global headquarters in Pittsburgh and operates in nearly 70 countries around the world. In 2012 the company recorded sales of $15.2bn. Pittsburgh Corning is known predominantly for manufacturing glass block windows for homes and commercial buildings, and employs around 1500 employees throughout North America and Europe.
Following news of Pittsburgh Corning’s reorganisation plan, shares in PPG Industriesrose 50 cents to end at $157.33. Shares of Corning increased 10 cents to close at $15.76.
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