KUHN CAPITAL Monday, October 23, 2017
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An End to Metastasizing Abestos Claims?

2/3/03

The Financial Times reported today an innovative maneuver used by Honeywell to avoid endless abestos claims brought against its Bendix unit -- sell the business to a company already in bankruptcy.

The Bendix buyer is Federal Mogul, now in Chapter 11, and the effect would be to protect Honeywell as well as Federal from asbestos claims yet to be filed.

Federal's reorganization calls for it to emerge from bankruptcy with the combined claims bundled into a trust that owns the majority of Federal shares. The alternative for Honeywell would have been continuous and growing litigation stretching over years without settlement.

We anticipate that the class-action plaintiff's bar may be a good deal less enthusiastic about the deal. After all, it caps their burgeoning careers in jackpot justice, bringing suits on behalf of "victims" with no disease symptoms.

Recent estimates are that over 60 companies have been forced into bankruptcy by such claims, many of whom were merely peripheral users of asbestos products at a time when its dangers were unknown, and that the total costs of such claims could reach $275 billion.

On the other hand, we wonder if such a technique might eventually be used to deny legitimate creditors their day in court.


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