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Owens Corning filed for protection from creditors under the federal bankruptcy laws last Thursday to help it cope with asbestos-related lawsuits that have cost the company $3.1 billion. The supplier of building and industrial materials estimated in July it faced another $3 billion in asbestos payouts even though it stopped selling asbestos products more than 25 years ago. The voluntary Chapter 11 filing in Wilmington, Del., would allow the company to develop a plan of reorganization that would resolve its asbestos liabilities while allowing it to continue operating its businesses, the company said in a news release. Asbestos, which can cause health problems when inhaled, is a white flaky substance widely used during the 1940s and 1950s for insulation and in shipbuilding and in power plants. It has been known to cause lung cancer and asbestosis, a lung-scarring disease. Toledo-based Owens Corning, probably most familiar for its Pink Panther mascot, has made payouts to 440,000 people who said asbestos made them ill. Glen H. Hiner, chairman and chief executive officer, said the company had made progress toward settling asbestos claims through a national settlement program and thought a bankruptcy protection filing could be avoided. However, the cost of resolving claims, combined with new legal filings, “led us to the conclusion that a Chapter 11 reorganization was prudent and necessary,” he said. Yesterday Owens Corning said it hopes to seal a deal with a bank syndicate that would prevent the foreclosure on a $1.3 billion loan, which could jeopardize a company reorganization in the wake of over $5 billion in asbestos-related litigation settlements. Bankruptcy judge Mary Walrath agreed to a request by Owens attorney Norman Pernick that she reconvene later on Tuesday a hearing that began early this morning. Pernick said Owens needed the extra time to “get a consensual order with all the banks, or, if not, a temporary restraining order with a few of the banks.” Credit Suisse Group’s (CIK.N) First Boston banking investment arm is the agent for the syndicate. At issue is Owens’ concern that if the banks declare the loan in default and immediately payable, Owens will not be able to restructure 237,000 pending asbestos claims. On Thursday, Owens and 17 U.S. affiliates filed for Chapter 11 bankruptcy protection, triggering a default provision in its 1997 $1.8 billion loan agreement with the banks originally set to mature June 2002. “Owens Corning is in financial trouble because of the staggering toll extracted…by years of asbestos litigation…In order to control and resolve, once and for all, asbestos-related liability, Owens Corning filed these Chapter 11 cases,” court papers say. “(Its) operating business are (sic) profitable but for the obligation to pay asbestos claims,” the company noted. Owens said in the document that it has already paid more than $5 billion for asbestos liability. As of June 30 it had another $2.4 billion in unpaid asbestos-related liabilities under a National Settlement Program, and an additional $1.4 billion liability for its Fibreboard Corp. subsidiary. New asbestos claims also continue to be filed outside the settlement program. “Owens Corning obtained the cash required to make asbestos- related payments by drawing on its bank line of credit and by issuing long-term debentures.” According to court papers, long-term debt on June 30 was $2.8 billion.
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