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BY JENNIFER SUDICK
Medill News Service | Wednesday, February 08, 2006 | (No comments posted.)
The future of Chicago-based USG Corp. and other asbestos users was on the line Tuesday as a long-awaited bill intended to compensate thousands of victims of asbestos-related diseases cleared its first procedural hurdle in the U.S. Senate.
Wallboard manufacturer USG, one of more than 70 U.S. companies pushed into bankruptcy by floods of asbestos lawsuits, stood in strong support of the $140 billion trust-fund bill, named the Fairness in Asbestos Injury Resolution Act of 2005. The fund would be financed by asbestos companies and insurance carriers over 30 years and administered by the federal government.
Asbestos fibers have been linked to serious lung diseases and cancer.
Sen. Arlen Specter, R-Pa., a cosponsor of the bill, said in a news conference Thursday that if the bill failed, he doubted there would be another.
Later, senators voted overwhelmingly to permit debate on the measure, defeating an attempt by Democratic leader Harry Reid of Nevada to block the legislation.
"We have stated over and over ... that Congress needs to fix this asbestos problem, and we agree with that and have supported that for a long time," Robert Williams, USG director of corporate communications, said before Tuesday's vote. "If the FAIR Act is passed into law, our agreement preserves the public policy benefits that are envisioned under the FAIR Act. But if it's not enacted, we have an alternative solution."
Williams emphasized that the company's June 2001 bankruptcy filing had nothing to do with its "organizational health." USG reported record net sales of $5.1 billion for 2005, citing improved wallboard pricing and record shipments. The company reported net earnings of $510 million, or $11.70 per share, excluding a pretax charge in the fourth quarter for its plan to resolve its asbestos liability, in the year ended Dec. 31.
USG announced on Jan. 30 it had reached a settlement of all asbestos claims against it through the creation of a trust with an initial fund of $900 million in cash -- what USG estimates to be its obligation under the trust-fund bill -- and a contingent note for $3.05 billion, which would be canceled if the bill is enacted. If the bill fails, USG will need to draw on the note to settle the claims against it. The company has nearly $1.6 billion cash on hand to fund the settlement and pay creditors. It also plans to raise $1.8 billion through an equity offering, allowing current shareholders the right to buy newly issued shares at a lower price. The offering is supported by Warren Buffett's Berkshire Hathaway Inc., a major shareholder.
There are still obstacles to the FAIR legislation. For example, Senate leaders again will have to muster 60 votes to defeat a move to kill the bill on grounds it exceeds budget spending caps.
The stock closed at $90.60, down 60 cents. It has more than tripled since last year.
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