Halliburton Close to a Deal on Asbestos Liabilities

Houston-based Halliburton appears to be closer than ever to settling outstanding asbestos liabilities. There are more than 400,000 claims, exceeding $4 billion.

The company announced that the bankruptcy court in Pittsburgh, which has been holding hearings on the negotiated bankruptcy of its subsidiary, DII Industries, has completed hearings on its proposed plan of reorganization. Halliburton said it “expects that the necessary bankruptcy court and district court orders confirming DII Industries’ proposed plan of reorganization will be entered by the end of the summer 2004.”

The announcement added that, “consistent with earlier rulings, the bankruptcy court announced it intends to issue a final order denying standing to the insurance carriers’ objections to confirmation of DII Industries’ proposed plan of reorganization, other than relating to insurance neutrality. Certain insurers have reserved the right to appeal the final order denying standing. The appeals will be withdrawn if all of the company’s insurance settlements, including those discussed below, become effective.”

Regarding the insurers, the bulletin indicated that DII Industries is currently in the process of negotiating a “non-binding agreement in principle with its solvent domestic insurance carriers that, if implemented, would settle remaining insurance disputes with those carriers. The agreement in principle would be subject to board of directors’ approval of all parties, agreement by Federal-Mogul Products, Inc. and approval by the Federal-Mogul bankruptcy court.”

Halliburton also announced that “DII Industries has entered into a non- binding agreement in principle with the leaders of the London Market insurance companies that, if implemented, would settle insurance disputes between DII Industries and substantially all the solvent London Market insurance companies. The agreement in principle is subject to board of directors’ approval of all parties and agreement by all remaining London Market insurers.” Halliburton reached a settlement of asbestos claims with Lloyd’s Equitas last January.

The agreements won’t come cheap either for the insurers or the company. Halliburton said that these settlements, and those previously announced, would, “result in the receipt of an aggregate of approximately $1.6 billion in cash (with a present value of $1.4 billion) for all DII Industries’ insurance receivables. Of this amount, Halliburton expects to collect over $1 billion by the middle of 2006.” The overall amount of the claims settlement is expected to be around $2.775 billion.

The company’s announcement duly noted that the complex series of agreements are still subject to numerous conditions, including “the condition that Congress does not pass national asbestos litigation reform legislation before January 5, 2005.” In view of the recent collapse of negotiations in the Senate to establish an asbestos fund, this appears unlikely.

Chairman, President and CEO Dave Lesar commented: “I am pleased that we have reached these significant milestones toward resolving our asbestos liability. These insurance settlements, if consummated, will resolve disputes between us and our carriers, forestall further appeals, and allow the bankruptcy proceedings to be completed expeditiously.”