Federal-Mogul Gets Key Bankruptcy Agreement

(Akron/Tire Review) Federal-Mogul Corp can see light at the end of the bankruptcy tunnel, thanks to a key agreement that was reached late last week between the company and administrators in the UK that will settling outstanding asbestos claims. The agreement is seen as key to allowing Federal-Mogul to emerge from Chapter 11 bankruptcy after some four years.

As part of the settlement agreement, an Asbestos Trust would be established to satisfy indemnification obligations to the company by delivering a portion of the Trust’s equity back to the company. One of the company’s biggest investors, Carl Icahn, agreed to provide the Asbestos Trust, once Federal-Mogul’s reorganisation plan is approved, with immediate liquidity either by straight financing or by exercising an option to acquire the Asbestos Trust’s position in Federal-Mogul.

Federal-Mogul chairman, president and CEO José Maria Alapont said the agreements represent one of the most significant steps toward emergence from Chapter 11 in the US and administration in the UK. “We are pleased with the support and collaboration in the recent months from Mr Icahn, our plan proponents and stakeholders,” he said. “We will welcome Mr Icahn’s potential increased stake in the emerging and reorganised company.”

Icahn stated that he was extremely pleased by the settlement agreement among the parties and was gratified that he was able to lend assistance to the settlement process. He further stated that he looked forward to the company’s early emergence from Chapter 11, especially at a time when it appeared that other companies in the auto parts industry were moving in the opposite direction.