NEW YORK — Manville Corp. has agreed to make additional payments of as much as $520 million over seven years to the trust set up to benefit asbestos victims. A comprehensive settlement disclosed Monday also will revamp the way claims are paid, giving priority to the most gravely ill.
The plan is meant to settle about 150,000 pending claims by people injured by Manville-produced asbestos. Court-appointed special adviser Leon Silverman began working on it in July, when the Manville Personal Injury Settlement Trust ran out of cash. U.S. District Judge Jack B. Weinstein, in Brooklyn, N.Y., at the time ordered a temporary halt to nearly all payments by the trust and requested a radical restructuring.
The new plan also addresses the judge's complaint that too much of the trusts' limited assets were going to pay attorneys' fees. Under Silverman's proposal, victims' lawyers would get no more than 25% of whatever settlement their clients receive from the trust.
The settlement must now be approved by the judge, who is due to hold the first of a series of hearings on Friday. The judge is expected to combine all of the currently pending claims against the trust into a single class-action lawsuit. The settlement would then remove thousands of asbestos claims from court dockets around the country.
Tom Stephens, Manville's chairman and chief executive, said in a statement: "These steps--a new claims processing system implemented through the class action and the refinancing agreement--will more effectively, efficiently and equitably compensate those injured by asbestos exposure."
Silverman, in an interview, called it "the fairest and most equitable plan that can be devised."
The trust was set up in 1988, when Manville Corp. emerged from Chapter 11 bankruptcy proceedings. Manville turned over much of its assets to the trust for payment to former workers and others suffering asbestos-related injuries such as lung cancer and asbestosis.
The number of claims filed, however, turned out to be more than three times what lawyers had expected. The trust also had been paying claims on a first-come, first-served basis, with no provision for the most seriously ill to get financial help first.
The new payments system can go into effect once any appeals of the judge's expected approval of the class action are resolved. Some victims' lawyers have opposed handling the settlements under a class action.
The new settlement plan allows the trust to boost its holdings to 80% of Manville's common stock by allowing the trust to convert preferred stock it holds into common. The settlement will result in a windfall for all of Manville's common shareholders. The $520 million that will be injected into the trust will be part of $650 million in special dividends that will be paid on the common stock.
In New York Stock Exchange composite trading, Manville closed Monday at $5.125 a share, up 25 cents from Friday's close.
The dividend payments will be divided over seven years, with the first payment, $125 million, to be made at the end of 1991, assuming all aspects of the settlement are approved. Succeeding annual payments will be $125 million, $50 million and $50 million, with a final payment of up to $300 million to be paid out over the fourth through seventh years depending on the company's financial performance.
The new plan retains the provision in the original settlement that provided for the trust to receive, for as long as needed, 20% of Manville's annual profits beginning in 1992.
Silverman said it is likely that Manville will have to go the capital markets to raise money to meet the initial dividend payments.
The agreement between Manville and the trust also provides for an exchange under which the trust will turn in $1.8 million of Manville bonds it currently holds for new bonds that would be marketable. The trust thus would be able to raise additional immediate cash by selling off the bonds in chunks.