LeBoeuf, chairman and chief executive officer of PPG. "Although we continue to believe we're not responsible for Pittsburgh Corning's products, we feel this agreement will benefit our company and our shareholders in view of the number of claims and runaway verdicts against other companies."
LeBoeuf said the agreement would be incorporated into a plan of reorganization for Pittsburgh Corning, which will be submitted to the federal bankruptcy court in Pittsburgh. The agreement will become effective 30 days after the reorganization plan is approved and no longer subject to appeal. This process could take a year or more, and no payments are required until then. At that point, PPG will issue certain policy releases and credits against policy limits to participating insurers in exchange for their contributions to the fund.
When a final settlement is probable, PPG plans to record an aftertax charge of about $500 million, reflecting primarily the current value of cash contributions over a 21-year period, as well as 1.4 million shares of PPG stock. Also included in the settlement is the contribution of PPG's shares of Pittsburgh Corning. PPG's insurers have agreed to make substantial contributions to the settlement. Payments by insurers and PPG would total approximately $2.7 billion during the 21 years.
Pittsburgh Corning was established in 1937 to sell glass block and foamglass low-temperature insulation --neither of which contained asbestos. Pittsburgh Corning manufactured asbestos-containing high-temperature pipe insulation from 1962 to 1972 and filed for bankruptcy in 2000. As a result of the bankruptcy, PPG wrote down its investment in Pittsburgh Corning with a $35-million aftertax charge in the first quarter of 2000.
LeBoeuf said the agreement would have no effect on PPG's operations, including capital spending, dividend policy, liquidity or the company's commitment to technology and customer service. The settlement does not include claims against PPG caused by asbestos exposure on premises owned, rented or controlled by the company. "These claims are not significant and are covered by separate insurance agreements," LeBoeuf said. Under terms of the agreement, a trust would be established for the benefit of claimants and funded with contributions under the settlement agreement. The court would also enter a permanent channeling injunction under Section 524(g) and other provisions of the Bankruptcy Code, in which all covered claims against PPG and Pittsburgh Corning are channeled to the trust for payment. LeBoeuf said although it is possible the injunction might be challenged, he strongly believes it will withstand legal review.