July 10, 2019 – The Debtors notified the Court that their Modified Joint Prepackaged Plan had become effective as of July 9, 2019 [Docket No. 296]. Previously, On May 17, 2019, the Court approved the Debtors' Disclosure Statement and confirmed their Plan [Docket No. 241].
On January 23, 2019, Maremont Corporation and 3 affiliated Debtors (“Maremont” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 19-10118 [Docket No. 1]. In their Petition, the Debtors, each a wholly-owned, non-operating subsidiary of Meritor, Inc. ("Meritor," NYSE: MTOR) and historically involved in the manufacturing of automobile exhaust parts, noted between 10,000 and 25,000 creditors; estimated assets between $10 million and $50 million; and estimated liabilities between $100 million and $500 million.
In a press release announcing the consummation of the Debtors' Plan, Meritor stated: "All current and future asbestos claims related to the Debtors' historical asbestos-related activities have been channeled to an asbestos trust (the 'Trust') that will process and satisfy all such claims going forward pursuant to the Trust's resolution and payment procedures. As previously announced, pursuant to the Plan, which was supported by 100 percent of holders of current asbestos claims against Maremont that voted on the Plan, the Debtors established the Trust in accordance with the provisions of section 524(g) of the U.S. Bankruptcy Code. The Trust has been funded with a $28 million contribution from Meritor and Maremont's remaining assets, including approximately $21 million in cash and intercompany loan receivables less certain amounts needed to pay for the remaining administrative costs of the Chapter 11 Cases, as well as its remaining insurance assets.
Other key terms of the Plan include:
- An injunction that permanently protects the reorganized Debtors, Meritor and its subsidiaries, and certain of their related representatives from current and future claims stemming from Maremont's historical asbestos activities;
- All claims other than asbestos claims against the Debtors will be paid in full or reinstated; and
- Meritor's equity interests in Maremont have been cancelled. The Trust now owns 100% of the equity interests in reorganized Maremont."
The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan):
- Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%
- Class 2 (“Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%
- Class 3 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%
- Class 4 (“Asbestos Personal Injury Claims”) is impaired and entitled to vote on the Plan. Expected recovery is 29.1%. The current initial payment percentage assumes initial funding of not less than $58 million. Should the initial funding be between $58mn and $65 million, the initial payment percentage will increase proportionately. To the extent the Asbestos Personal Injury Trust is funded with less than $58 million or more than $65 million the initial payment percentage may be adjusted
- Class 5 (“Environmental Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%
- Class 6 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. Expected recovery is 0%/100%
- Class 7 (“Maremont Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Expected recovery is 0%
- Class 8 (“Subsidiary Equity Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Expected recovery is 100%
Asbestos Litigation and 524(g) Trust
Maremont, a non-operating subsidiary of Meritor, manufactured certain friction products containing asbestos from 1953 through 1977, when it sold its friction product business, and one of its subsidiaries manufactured certain exhaust products containing asbestos from 1954 to 1978, when it ceased using asbestos in such products. Arvin Industries, Inc., a predecessor of Meritor, acquired Maremont in 1986. Maremont and many other companies are defendants in suits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products.
As previously announced, on December 4, 2018, Maremont and its subsidiaries initiated a process to equitably and permanently resolve all asbestos liabilities related to the historic manufacturing activities of Maremont and its subsidiaries by soliciting votes from asbestos claimants. The deadline to submit ballots was January 18, 2019. One hundred percent (100%) of holders of current asbestos claims against Maremont that voted on the Plan voted in favor of the Plan. There were approximately 1,900 and 2,800 active asbestos-related lawsuits against Maremont and its subsidiary Maremont Exhaust Products, Inc. as of December 31, 2018 and December 31, 2017, respectively. Maremont believes that establishing a 524(g) trust will ensure an equitable and permanent resolution to all current and future asbestos claims related to Maremont asbestos products.
Among other things, the Plan is intended to permanently resolve all current and future asbestos claims related to Maremont's historical asbestos-related activities through the creation of a trust pursuant to Section 524(g) of the U.S. Bankruptcy Code. If the Plan is confirmed by the bankruptcy court and approved by the district court and all other actions necessary to implement the Plan are completed, Maremont will fund a 524(g) trust to address its current and future asbestos claims and permanently enjoin any future lawsuits related to such claims against, among others, Meritor and its non-Debtor subsidiaries, and channel all such claims and demands to the 524(g) trust.
Key Terms of the Plan
- Funding for the 524(g) trust will consist of a $28 million contribution by Meritor, together with a contribution of Maremont's remaining assets, including approximately $21 million in cash and intercompany loan receivables less certain amounts needed to pay for the administrative costs of the Chapter 11 Cases, as well as its remaining insurance assets;
- An injunction that permanently protects the reorganized Debtors, Meritor and its subsidiaries, and certain of their related representatives from current and future claims stemming from Maremont's historical asbestos activities;
- All claims other than asbestos claims against Maremont and its subsidiary debtors will be paid in full or reinstated; and
- Meritor's equity interests in Maremont will be cancelled. The 524(g) trust will own 100% of the equity interests in reorganized Maremont.
Asbestos Personal Injury Claim Disease Levels and Scheduled Values
The Asbestos Personal Injury Trust distribution procedures attached to the Plan as Exhibit D (the “TDP”) establishes five (5) asbestos-related diseases eligible for potential compensation from the Asbestos Personal Injury Trust (the “Disease Levels”): Mesothelioma 2 (Shade Tree Mechanic Claim), Mesothelioma (Occupationally Exposed Claim), Lung Cancer, Other Cancer, and Severe Asbestosis.
To qualify for payment from the Asbestos Personal Injury Trust, claimants must submit specific medical and exposure evidence as provided in the TDP. The Asbestos Personal Injury Claim values for each Disease Level are set forth below by level, disease category and scheduled value.
- Level V Mesothelioma 2: $12,100
- Level IV Mesothelioma: $111,500
- Level III Lung Cancer $25,400
- Level II Other Cancer: $5,400
- Level I Severe Asbestosis $25,400
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The post Maremont Corporation – Notifies Court of July 9th Plan Effectiveness Date as Debtors’ Equity Passes to Asbestos Trust and Meritor Looks to Put Asbestos Claims Behind Them appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.