HOUSTON — Cooper Industries has reached an agreement to resolve some of its liability for asbestos claims arising from Cooper’s former Abex Friction Products business by contributing to a trust being set up in the bankruptcy case of Federal-Mogul Corp. The settlement will resolve more than 38,000 pending Abex claims. Future claims will be resolved through the bankruptcy trust and Cooper will be protected against future claims by an injunction to be issued by the district court upon plan confirmation.
“Since Federal-Mogul’s bankruptcy process began in October 2001, we have worked tirelessly to bring this matter to a constructive conclusion,” said Kirk Hachigian, CEO and president, Cooper Industries. “At the same time, we have strengthened the company’s financial position and improved our strategic flexibility. Given the costs of continued litigation, the uncertainty of legislative reforms and the risks inherent in remaining in the tort system, we believe resolving the Abex liabilities through the trust is the preferable option for our shareholders. With this settlement in place, we will have certainty and finality on the Abex liability and can focus management resources on executing our strategic plan.”
The claims to be resolved through the bankruptcy trust relate to the Abex Friction Products business of Cooper’s former automotive products segment. Cooper sold its automotive products business to Federal-Mogul in October 1998. Cooper began defending against these asbestos claims pursuant to its guaranty obligations to the prior owner of Abex when Federal-Mogul filed a Chapter 11 bankruptcy petition and indicated that it may not honor its indemnity obligations to Cooper.
One of the key terms of the agreement is that Cooper will pay $130 million in cash into the trust, with $100 million payable upon Federal-Mogul’s emergence from bankruptcy. The remainder will be paid in two $15 million installments due on January 15, 2006 and January 15, 2007, or upon emergence from bankruptcy, if later. Cooper will receive a total of $37.5 million during the funding period from other parties associated with the Federal-Mogul bankruptcy.
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