ABI's 26th Annual Spring Meeting, the networking and CLE
event of 2008, will be held April 3-6 at Washington, D.C.'s Renaissance Hotel
in the Nation's Capital! Join us during cherry blossom season for exciting and
informative sessions, including a luncheon keynote by Supreme Court Justice
Samuel A. Alito, Jr.
The committee will meet on Friday, April 4, from 4:00 to
5:30 p.m.
In the case of In re Federal-Mogul, the plan proponents[1] and certain of Federal-Mogul’s insurers reached an innovative agreement that resulted in an uncontested plan confirmation ruling, allowing the debtors to consummate their reorganization plan promptly and free of appeals. Toward the end of 2007, Federal-Mogul faced strong market pressure to conclude its bankruptcy case. This pressure resulted primarily from the fact that its exit lender’s commitment to provide a $3.5 billion financing facility was set to expire on Dec. 31, 2007. Absent consummation of its plan by that deadline, Federal-Mogul was faced with having to renegotiate its credit facility in a tight credit market and risked further delaying its emergence from bankruptcy.
To allow the company to move forward with
the consummation of its plan, Federal-Mogul, its asbestos constituencies and
those of its insurers who stood in opposition to plan confirmation agreed to
carve out from the confirmation process the issue of whether the Bankruptcy
Code preempts state law and authorizes the assignment of insurance proceeds to
a §524(g) trust notwithstanding the terms of any anti-assignment provisions in
the insurance policies at issue. The asbestos insurance rights assignment issue
was central to Federal-Mogul’s plan. Under §524(g), a debtor seeking to obtain
the protections of a channeling injunction is required to establish and fund a
trust to pay the pending and future asbestos claims for which the company is
liable. The plan provided for the funding of Federal-Mogul’s trust by
transferring to it the right to collect proceeds from the insurance coverage
Federal-Mogul has available to pay asbestos claims in addition to funding the
trust with a substantial equity stake in the reorganized company. Federal-Mogul
consummated its plan on Dec. 27, 2007, and even though several insurers may yet
pursue limited appeals related to the assignment and preemption issue, those
appeals will not undermine the “finality” of the confirmation order or
otherwise impact Federal-Mogul’s emergence from bankruptcy.
Read the full article.