Link: Federal Mogul distorts insolvency fgures
The situation has become so bad that in some cases claimants granted compensation have received cheques that have subsequently bounced.
Federal Mogul went into Chapter 11 bankruptcy in the US in October 2001, pushed into insolvency by asbestosis claims totalling £1.2bn, including those against UK subsidiary Turner & Newell. The subsidiary manufactured automotive parts, many of which contained asbestos.
The claims have reached a figure far bigger than the value of the company, a fact that has created an obstacle for managers as they struggle to pay creditors and asbestosis claimants.
Simon Freakley, administrator for Federal Mogul’s UK subsidiaries, said: ‘There are 800 UK claimants who are ill, but the sheer number of the US actions is causing the problem.’
Because the US and British insolvency procedures affecting the company are ‘inextricably linked’, UK creditors cannot be paid. The administration involved with the bankruptcy is also taking time. Under Chapter 11, the company must submit a ‘consensual’ plan for the agreement of creditors.
‘We are hoping the consensual plan championed by the company will be accepted,’ he said, adding that if the plan fails, the case will be dragged through the US courts and money will be kept from claimants for years.
The injustice of the situation is compounded by the fact that UK claimants are already ill while more than 90% of the US lawsuits involve claims from people saying they could become ill through asbestos exposure, according to Freakley.
Lawyers at Robinson and Murphy Solicitors handling 20 UK asbestos claims worth £100,000, explained that victims have settled cases and are still waiting for payments.