Canadian Underwriter

Busy period for asbestos liability, as three companies make key disclosures

August 13, 2002   by Canadian Underwriter

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Shares of Ashland Inc. were hit August 8, amid concerns about the company’s liability to asbestos claims. Ashland’s stock fell as much as 19.6 per cent earlier, hitting a new 52-week low of $29. The sell-off stems from disclosures contained in Ashland Inc.’s latest 10Q report, which it filed to the Securities and Exchange Commission on August 7. In it, the company said it’s facing a “significant” number of claims related to Riley Stoker Corp., a subsidiary it sold in 1990. Ashland said that it is “subject to liabilities related to a significant number of claims alleging personal injury from exposure to asbestos, primarily as a result of indemnification obligations relating to the sale of Riley Stoker Corp, a former subsidiary.” As of June 30, there were 154,000 open claims against the company. Ashland’s business comprises road construction and materials, lubricants, car-care products, specialty chemicals, chemical and plastics distribution and transportation fuels.
Separately, in another filing with the SEC this week, Goodyear Tire & Rubber Co. said it had roughly 73,900 asbestos claims pending as of June 30 and an asset for expected recoveries under insurance policies and coverage-in-place agreements with primary insurance carriers. The claims are connected with exposure to asbestos in certain rubber-coated products manufactured by Goodyear in the past or in its facilities, the filing said. During the second quarter, the company said it received around 6,500 new claims and resolved about 565 asbestos claims. Goodyear said it spent roughly $1.8 million during the second quarter on asbestos litigation defense and claim resolution.
And McDermott International Inc. surprised Wall Street August 9 when it announced a tentative agreement to assign all of its equity in the Babcock & Wilcox unit to trusts created for the benefit of all current and future asbestos claims. The energy services company said it would contribute all applicable insurance proceeds to the one or more trusts and issue 4.75 million shares of restricted McDermott common stock, which would be guaranteed a worth of $19 a share three years from their issuance. A research analyst said the tentative deal would saddle all of McDermott’s liability for asbestos claims within its Babcock & Wilcox unit, thereby leaving the company’s two other valuable units, J. Ray McDermott and BMX Technologies, protected from any asbestos liability. In a conference call with analysts, John Nesser, McDermott International’s executive vice president, said if the tentative asbestos agreement is finalized, the company, its directors and affiliates would be significantly protected from future asbestos claims.

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