Engineering Groups Face Possible Asbestos Related Suits ------------------------------------------------------- Published November 08, 2002 ABB has drawn up plans to cap its US asbestos liabilities, which have threatened to drive Europe's second biggest engineering group into bankruptcy. The move by the struggling group came as news of fresh asbestos claims drove shares in several European engineering companies sharply lower. Royal and Sun Alliance, the UK insurer, also fell after the Financial Times revealed on Friday that it faced a fresh claim. ABB's proposals, which involve bankruptcy protection for Combustion Engineering, its troubled US unit, would limit its US asbestos burden to about $1.1bn, much less than analysts had expected. The bankruptcy protection could include the settlement of pending and future litigation. The group said negotiations were already under way with US asbestos plaintiffs to resolve CE's liability and take it into a Chapter 11 bankruptcy that would include provisions to pay asbestos claims. ABB estimated that the claims would be met by CE's $812m (EU815.2m) in assets and another $300m paid out over several years. "We are very confident that we will make progress to get the (settlement) approved," said Peter Voser, ABB chief financial officer. A settlement would solve the problem of asbestos once and for all for ABB and its subsidiaries, he said. ABB is looking to break itself up after a shock profits warning last week that cut its share price by nearly two thirds. It said at the time that asbestos costs at CE would exceed the subsidiary's asset value. ABB shares fell nearly 15 per cent on Friday, closing SFr0.29 lower at SFr1.68. As well as asbestos fears, investors were rattled by the move late on Thursday by Moody's, the credit rating agency, to cut the group's $8.4bn debt to "junk" status, raising the prospect that it will have to be bailed out by its bankers. Among the hardest hit engineering stocks on Friday was Alfa Laval, the Swedish group, whose shares fell 32 per cent after it emerged late on Thursday that a US subsidiary had been named in 40 asbestos suits. Shares in Royal & Sun Alliance, the UK's second largest general insurer, fell 12 per cent. It confirmed that it was facing an asbestos liability lawsuit from Turner & Newall, the UK engineering group and former asbestos producer, on behalf of former employees. RSA is still looking for a new chief executive and has promised to spell out its capital requirements to investors on Thursday, although a long- rumored rights issue looks increasingly unlikely. Colin Morton, a fund manager with BWD Rensburg, said, "The whole insurance sector faces mounting asbestos claims, but if you're one of the weakest players in the sector, you'll be the hardest hit." Shares in Trelleborg, the diversified Swedish industrial group, also fell sharply as the group said its US distribution subsidiary had faced asbestos claims, but had lost none. In any event, the company said, Goodall had insurance against losing such claims. Trelleborg shares closed 9.4 per cent down. Atlas Copco, another Swedish group, saw its shares sink as it confirmed that it had asbestos- related legal claims filed against it. The shares dropped 8.1 per cent to SKr165 . Elsewhere, France's Saint-Gobain dipped 2.3 per cent to EU21.43, while Lafarge fell 5.5 per cent to EU76. ----------------------------------------------------------- LitigationDataSource.com