January 5th, 2005
Over 38,000 asbestos exposure lawsuits and claims are to be settled by Cooper Industries over the next couple of years. The claims are in relation to the company’s former Abex brake unit, and the company plans to throw cash and shares at the problem in order to settle claims over the next couple of years. Over $130 million cash and over $100 million worth of shares will help the company to settle the claims.
It is estimated that the company and its insurers could end up paying out a further $500 million – perhaps more – over the next quarter of a century in order to settle future claims resulting from the asbestos exposure. A trust is being set up in which the funding will go to make the payments. This will be under Federal Mogul, which bought Abex in 1998.
In addition to the courts giving approval to the companies settlement proposal, seventy-five percent of claimants must also agree, but officials state that they do not foresee any problems. Although it is thought that insurance companies may object, the Chief Finance Officer stated: "Our view is these objections are typically thrown out."
The CEO stated: "This agreement, when adjusted for insurance, income-tax benefits and the time value of money, will have a very modest impact to both our short-term and long-term capital structure and allows us to spread the liability over 25 years. Hence, Cooper's overall business strategy remains firmly intact."
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