SOUTHFIELD, Mich. (April 11, 2003)—Federal-Mogul Corp., which has been operating under Chapter 11 bankruptcy protection for a year and a half, has filed its reorganization plan with the Bankruptcy Court for the District of Delaware.
The plan is subject to a vote of various classes of creditors and court approval, as well as Federal-Mogul's submission and the court's OK of its disclosure statement.
Federal-Mogul also plans to file a U.K. Scheme of Arrangements to keep the United Kingdom administration process parallel to the U.S. bankruptcy process.
Federal-Mogul filed for Chapter 11 bankruptcy protection in October 2001 to shield itself from mounting asbestos claims. The company acquired the asbestos liabilities when it bought British auto supplier T&N P.L.C. in 1998. Federal-Mogul manufactures engine components, seals and replacement parts.
Under the proposed plan, billions of dollars worth of debt and asbestos claims will convert to equity in the reorganized company, making it a closely held public corporation.
Federal-Mogul's creditors will get 49.9 percent of the new common stock, and 50.1 percent of the shares will go to a trust established to pay current and future asbestos claims.
The seal maker's trade creditors here and abroad will receive one or more cash distributions, but the exact amounts haven't been determined. The approximately $1.6 billion in prepetition senior secured lender claims will be restructured into a combination of 6.5-year maturity senior secured term loans and 11-year maturity junior secured notes.
The company expects to emerge from Chapter 11 some time this summer. Creditors and a Bankruptcy Court judge must approve the plan before it's put into effect.