Subject:  Halliburton settles billions in asbestos claims |
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Date Posted: 18:13:31 12/18/02 Wed
Dec,18,2002
Halliburton settles billions in asbestos claims
From staff and wire reports
Halliburton Co. said it has agreed to pay about $4 billion in cash and stock to settle hundreds of thousands of asbestos claims against it.
Representatives for the Houston-based oil-field-services company were in U.S. Bankruptcy Court in Pittsburgh today to settle most of the pending asbestos cases against the company and one of its former subsidiaries.
The proposed settlement payment would include $2.8 billion in cash and and 59.5 million shares currently worth about $1.2 billion.
If the complex deal is approved by the bankruptcy court as expected, Halliburton would put two of its operations under Chapter 11 bankruptcy protection: KBR, which is better known as Kellogg Brown & Root, and DII Industries, which was formerly known as Dresser Industries.
This maneuver would allow a trust to be set up to handle the asbestos claims as well as any litigation that springs from the case. The aim is to shield Halliburton from financial claims that could jeopardize its financial future.
Hallilburton said it will continue to own those two subsidiaries, and no layoffs or cuts in salaries and benefits should result.
"The agreement will allow Halliburton and KBR to remain financially strong and maintain their competitive position," Dave Lesar, chairman, president and chief executive of Halliburton, said in a statement. "The plan should have no effect on any of KBR's present or future projects. In other words, outside of the global asbestos settlement, it will be business as usual while the plan is implemented."
KBR's operations serving the U.S. military will not be included in the bankrputcy filing.
Halliburton had said in recent weeks it was close to a multibillion-dollar deal that would settle the 300,000 asbestos-related personal injury claims against it.
Most of those claims were inherited four years ago when Halliburton -- which also operates a huge engineering and construction business -- acquired rival Dresser Industries Inc. for $7.7 billion. Vice President Dick Cheney ran Halliburton at the time of the purchase.
Cheney left the company in 2000 to become President Bush's running mate.
The proposed agreement will cover all present and future asbestos claims. It also will allow Halliburton to retain ownership of its subsidiaries, including Dresser and Kellogg Brown & Root.
"This agreement in principal represents good news for our shareholders, customers, vendors, employees and everyone else with whom we do business," said Lesar. "If this transaction is completed, it will resolve a major issue that has been clouding our future."
This year, a consultant estimated that Halliburton faced a potential liability of $2.2 billion over the next 15 years from claims involving asbestos, a heat-resistant material with fibers that have been linked to lung cancer.
The consultant said all but about $600 million of the potential liability would be covered by insurance, and the claims continued to be a drag on the company. For many years, Halliburton managed to settle cases for relatively modest sums. But last year, verdicts in Texas, Mississippi and Maryland totaled $152 million.
In February, Pittsburgh-based Harbison-Walker Refractories Co. -- which was spun off by Dresser in 1992, before the Halliburton deal -- filed for Chapter 11 bankruptcy protection. As part of that filing, a judge agreed to delay the claims against Halliburton, two-thirds of which involved Harbison-Walker, while a trust was created as a way to potentially settle the asbestos suits.
Halliburton has claimed that Harbison-Walker promised to bear the liability for any asbestos claims filed against it after 1992 and did so for several years -- until 2001, when the Pittsburgh company said it would no longer bear that liability.
Halliburton has sued Harbison-Walker over the liability issue in federal court in Dallas.
Harbison-Walker made construction products containing asbestos for many years and was part of a Baltimore case in which a state jury awarded five people who claimed asbestos exposure $40 million. It was that verdict which led to Halliburton stock prices plummeting by more than one-third their value last December.
In May of this year, Halliburton announced it had settled 30 asbestos lawsuits pending in a New York federal court, declining to release terms of the settlement. In the second quarter of this year, the company said it lost $498 million -- its first loss in four years -- as it took charges against earnings, in part, for asbestos-related claims.
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