Cooper Industries Ltd. said Friday it reached a revised agreement regarding its participation in Federal-Mogul's asbestos claimants' trust.
As part of the deal, Cooper, a manufacturer of electrical products and tools, has agreed to pay $256 million in cash into the trust on the date Federal-Mogul emerges from bankruptcy. Cooper negotiated elimination of the contribution of 1.4 million common shares to the trust by increasing the cash contribution, and the company will receive $37.5 million from other parties toward its cash obligation.
Cooper sold its Automotive Products business, including its Abex Friction Products business, to FMC in October 1998 and was indemnified for liabilities related to the divested business. In 2001, FMC and several of its affiliates filed a Chapter 11 bankruptcy petition and indicated that FMC may not honor its indemnity obligations to Cooper, including its obligations for claims related to the Abex business.
By participating in this trust, Cooper will resolve its liability for asbestos claims arising from the company's former Abex business. The revised proposed settlement, if approved, will resolve more than 38,000 pending Abex claims. Future claims will be resolved through the bankruptcy trust, and Cooper will be protected against future claims by an injunction to be issued by the court upon plan confirmation.
"In addition to the terms for participation in the Federal-Mogul 524(g) trust, the revised agreement provides Cooper with a fair resolution of its claims against Federal-Mogul in the event that the revised settlement is not approved by the current Abex asbestos claimants or the bankruptcy court," said Kirk Hachigian, chairman, chief executive officer and president of Cooper. "Given the costs of continued litigation, the uncertainty of legislative reforms and the risks inherent in remaining in the tort system, we believe resolving the Abex liabilities through the trust is the preferable option for our shareholders. With this settlement in place, we will have certainty and finality regarding the Abex liability and can fully focus management resources on executing our strategic plan."
In mid-December 2005, Cooper and other parties involved in the FMC bankruptcy proceeding reached an agreement regarding Cooper's participation in Federal-Mogul's 524(g) asbestos claimants' trust. The proposed settlement agreement was subject to certain conditions, including the issuance of a preliminary injunction staying all of the pending Abex asbestos claims for which Federal-Mogul provided indemnification. At a hearing on Jan. 20, 2006, FMC and other parties to the bankruptcy proceedings were unable to satisfy the court's requirements to grant the required preliminary injunction. As a result, the proposed settlement agreement required renegotiation of certain terms, which has now been completed.