BorgWarner recently announced that it has divested BorgWarner Morse TEC LLC (Morse TEC), a wholly-owned subsidiary of the company that holds asbestos and certain other liabilities, to Enstar Holdings (US) LLC, a subsidiary of Enstar Group Limited. In connection with the closing, BorgWarner contributed approximately $172 million in cash to Morse TEC.
“Enstar is a leading player in managing legacy liabilities and has specific expertise in asbestos,” said Frédéric Lissalde, BorgWarner president and CEO. “This reflects our company’s strategy to eliminate or reduce exposure to legacy non-operating liabilities and to actively manage and deploy capital.”
Enstar’s team of experts will assume the operational management team of Morse TEC. This includes the management of all of Morse TEC’s asbestos claims and collection of existing insurance policies.
As a result of the transaction, BorgWarner expects to remove the asbestos obligations, related insurance assets and associated deferred tax assets from the company’s condensed consolidated balance sheet. The company is evaluating the accounting for this transaction, but currently estimates that this transaction could result in an after-tax loss in its consolidated financial statements of up to $40 million in the fourth quarter of 2019.