The firm hopes to create a framework for settling 300,000 claims that have forced the bankruptcy of the giant Federal Mogul and 133 UK subsidiaries.
It is hoped that KBP’s solution will set a worldwide precedent for settling asbestosis damages claims, a phenomenon which nearly brought down London’s giant insurance market Lloyds.
Lead administrator Simon Freakley told Accountancy Age: ‘Undoubtedly the framework we create with the courts will set a precedent and show a way for other cases like this to be settled.’
The firm was granted permission by FM’s creditors to establish a framework to settle claims which brought the engineering giant to its knees in October.
KBP will negotiate with the courts to establish the framework for agreeing settlements.Robin Parson of Sidley Austin Brown and Wood, the lawyers acting for FM in the US, said this would be the first ‘global’ solution for asbestosis claims.
‘It will undoubtedly set a precedent,’ he said.
The largest transatlantic insolvency prior to Enron, the collapse of FM was caused by 300,000 asbestosis claims against it and its UK subsidiary Turner & Newell, which alone is a defendant in 180,000 of the cases. It is understood 90% of the claims are not from people who are actually suffering from asbestosis.
FM bought Turner & Newell in 1989 at a discount because it expected asbestos claims, but never anticipated they would run as high as they have.
According to Freakley, the cost of claims is likely to be as much as £1.1bn ($1.6bn), with a minumum of £252m ($360m) to be paid within 12 months. The company’s trading profits are less than £245m ($350m).
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