toledoblade.com -- The Blade ~ Toledo Ohio

With bondholders, shareholders, and other creditors largely voting for Owens Corning's plan to exit bankruptcy, the Toledo firm sailed by another landmark this week in its six-year-old Chapter 11 case.

One other big creditor group, the asbestos-injury claimants, is expected to give its nod to OC's reorganization plan Friday.

That should clear the way for a court hearing Monday in Pittsburgh after which a judge could give the building products maker approval to emerge from bankruptcy. The city's third largest corporation filed for Chapter 11 protection on Oct. 5, 2000, because of mounting asbestos-liability claims.

"We remain on track to emerge from Chapter 11 before the end of October this year," Jason Saragian, an OC spokesman, told The Blade yesterday.

OC's reorganization plan in U.S. Bankruptcy Court in Wilmington, Del., calls for paying asbestos victims $5.2 billion and banks and some other creditors $2.5 billion.

More than 131 million new shares of company stock valued at an estimated $3.9 billion would be issued under the plan, most of which would go to bondholders. Existing stock would be canceled.

In voting on this latest version of the exit plan - earlier plans had too much opposition - 94 percent of the bondholders approved it. The action was key, because some bondholders had been among the critics of previous bankruptcy-exit plans.

Voting in favor were 322 bondholders with more than $1.1 billion in OC debt.

Just 18 bondholders with nearly $65.7 million in debt rejected it, according to court documents filed Monday.

Holders of 21 million shares of OC stock voted to accept the reorganization plan, or more than 97 percent of those who returned ballots by the Sept. 1 deadline. Other nonasbestos creditors also approved the plan, according to court documents.

Approval was needed by half of respondents to the roughly 250,000 ballots sent out and by holders of two-thirds of monetary claims, OC's Mr. Saragian said.

Meanwhile, 75 percent of asbestos claims have to accept the plan, he said. OC made a product containing asbestos decades ago, and workers who used the products developed illnesses and have sued for damages.

When the downtown Toledo firm filed for Chapter 11, it had $7 billion in assets and $5.7 billion in liabilities.

One major dispute in the case was to how much the asbestos claimants were entitled, particularly how much was needed to cover future claims. Under the plan, trusts established to pay asbestos claims would be funded by $4.3 billion in cash and 28.6 million in new company stock.

In all, the company would pay $8.6 billion on $13.6 billion in claims. Banks would be paid in full. Recoveries include 50 cents on the dollar for asbestos claimants and 58 cents on the dollar for bondholders.

The exit plan has opponents, however.

Schultze Asset Management LLC, which holds more than $60 million in OC bonds, has said the firm's reorganization plan does not treat bondholders equally and was not proposed in good faith. James McCarroll, an attorney for Schultze, declined to comment yesterday.

Other entities that have filed objections to OC's reorganization plan include the U.S. Trustee's Office and two hedge funds that intend to appeal a dismissed lawsuit against some company leaders that alleged they breached their fiduciary duties before the bankruptcy filing.

Kensington International Ltd. and Springfield Associates LLC said in a court filing that OC's bankruptcy-exit plan could unlawfully protect officers and directors from their lawsuit.

Among objections from the trustee is that OC's distribution plan may discriminate against creditors that reject the firm's reorganization plan.

The reorganization is fairly complex, especially for bondholders and general unsecured creditors, and it calls for alternative distribution schemes based on their whether they accept or reject the plan, according to the trustee's objection.

Contact Julie M. McKinnon at:
jmckinnon@theblade.com
or 419-724-6087.

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