The Babcock & Wilcox Co. (B&W), a wholly owned subsidiary of McDermott International Inc., announced that B&W and certain of its subsidiaries filed a voluntary petition in the U.S. Bankruptcy Court for the Eastern District of Louisiana in New Orleans to reorganize under Chapter 11 of the U.S. Bankruptcy Code. B&W is taking this action because it offers the only viable legal process by which it can seek to determine and comprehensively resolve asbestos liability claims.
Roger Tetrault, CEO of B&W, said, “Historically it has been B&W`s practice to settle asbestos claims out of court. This has been a reasonable and responsible approach for nearly 20 years, which minimized costs to B&W and maximized payments to claimants. However, recent increases in settlement demands from claimants, coupled with a lack of legislative relief from the financial burden presented by the increased demands, have forced us to reexamine our approach. The asbestos claims, in the context in which they are now presented, represent a serious threat to B&W`s future. This filing is the only means available to resolve them.”
Included in the filing are B&W and its subsidiaries Americon Inc., The Babcock & Wilcox Construction Company Inc. and Diamond Power International Inc. Neither McDermott International Inc. nor any other McDermott subsidiary is included in the filing. B&W Canada is not part of the filing; however, B&W has requested the Court issue an injunction staying asbestos suits from being brought against B&W Canada.
To ensure that it has the capital necessary to meet letter of credit and cash needs to continue to operate its business, B&W has obtained a commitment of up to $300 million in debtor-in-possession (DIP) financing provided by with a group led by Citibank N.A. and Salomon Smith Barney, members of Citigroup.
B&W was a purchaser of asbestos rather than a manufacturer. The material was used many years ago in the power generation industry as insulation to protect people and equipment from high temperatures inside industrial, utility and marine boilers. The use of asbestos was specified and encouraged by U.S. government agencies for decades. B&W utilized asbestos in conformance with guidelines published by applicable regulatory bodies. Like many other users of asbestos, B&W was unaware its use of asbestos posed health hazards. After government regulations imposed low exposure thresholds for asbestos in the early 1970s, asbestos use by B&W and others in the industry was phased out.
McDermott acquired B&W in 1978. In 1982, B&W began to settle claims for asbestos exposure. As of Dec. 31, 1999, B&W had settled over 340,000 asbestos claims, with approximately another 45,000 claims outstanding and presented for settlement. The total cost of settling claims since 1982, borne by B&W and its insurers, has been over $1.6 billion.