Owens Corning Settles SuitsDec 18, 1998 | CNNfn
Building materials supplier Owens Corning agreed Tuesday to pay out some $1.2 billion over the next two years to settle the 176,000 asbestos cases filed against the company.
The Toledo, Ohio-based company said more than 50 plaintiffs' law firms agreed to the settlement under its National Settlement Program, bringing to a close 90 percent of Owens Corning's existing backlog.
The program also establishes procedures and fixed payments for resolving future claims without litigation, for a term of at least 10 years.
The money will come from its existing cash and credit resources, including bank lines. Owens Corning, which stopped selling asbestos-containing products in 1972, said bank lenders already have endorsed the plan.
Under the NSP agreements, payments on future claims would begin in 2001 and will be subject to an annual aggregate cash flow cap.
Based on recent Supreme Court rulings and new information about pending and future litigation claims gained in the NSP negotiations, Owens Corning said it expects to increase its asbestos reserves by $1.4 billion this year, resulting in an after-tax charge against earnings of about $900 million.
"The National Settlement Program is a major achievement towards resolving Owens Corning's liabilities in one of the largest and longest-running mass tort litigations in the history of the United States," said Glen Hiner, chairman and chief executive of Owens Corning.
"It dramatically reduces the high cost of legal defense and the risk of excessive verdicts against Owens Corning, makes more predictable the costs of our asbestos liability going forward, and enables the company to focus on capital-efficient growth," Hiner added.
He noted that by agreeing to pay only those future claimants who meet agreed upon criteria, the company expects the total annual cash outflow related to its asbestos liability in 2002 to fall below $200 million before the benefits of insurance and tax proceeds.