================================================================= DII & KBR BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2003 (ISSN XXXX-XXXX) December 17, 2003 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- DII & KBR BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Freya Natasha P. Fernandez, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Re-mailing of DII & KBR BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO DII & KBR BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF DII & KBR [00002] HALLIBURTON'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILINGS [00003] DII & KBR DEBTORS' CHAPTER 11 DATABASE [00004] LIST OF THE DEBTORS' LARGEST COMMERCIAL CREDITORS [00005] LIST OF THE DEBTORS' 30-LARGEST ASBESTOS CREDITORS [00006] INSURERS' MOTION TO DISMISS CHAPTER 11 PROCEEDING KEY DATE CALENDAR ----------------- 12/16/03 Voluntary Petition Date 12/__/03 Organizational Meeting with UST to form Committees 12/31/03 Deadline for filing Schedules of Assets and Liabilities 12/31/03 Deadline for filing Statement of Financial Affairs 12/31/03 Deadline for filing Lists of Leases and Contracts 01/05/04 Deadline to provide Utilities with adequate assurance 02/14/04 Deadline to make decisions about lease dispositions 03/15/04 Deadline to remove actions pursuant to F.R.B.P. 9027 04/14/04 Expiration of Debtors' Exclusive Plan Proposal Period 06/13/04 Expiration of Debtors' Exclusive Solicitation Period 12/16/05 Deadline for Debtors' Commencement of Avoidance Actions First Meeting of Creditors pursuant to 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO DII & KBR BANKRUPTCY NEWS ----------------------------------------------------------------- DII & KBR BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of DII & KBR BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving DII & KBR BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. Currently, we provide similar coverage about the restructuring proceedings involving W.R. Grace & Co., Owens Corning, Armstrong World Industries, USG Corporation, Safety- Kleen, Laidlaw, Aurora Foods, Vlasic Foods (another Pinnacle Foods acquisition), Air Canada, United Airlines, US Airways Group, Budget Group, ANC Rental, Mirant Corp., PG&E National Energy Group, Pacific Gas and Electric Company, Enron Corp., NRG Energy, Covanta Energy Corp., National Steel, Bethlehem Steel, LTV, Weirton Steel, Wheeling-Pittsburgh, Kaiser Aluminum, Metals USA, AMERCO (U-Haul's parent), WestPoint Stevens, Pillowtex, Burlington Industries, Warnaco, Fruit of the Loom, Fleming Companies, Kmart Corp., Ames Department Stores, Spiegel, Inc. (and its Eddie Bauer and Newport News subsidiaries), Leap Wireless, Adelphia Communications and Adelphia Business Solutions, Genuity, WorldCom, Global Crossing and Asia Global Crossing, Winstar, 360networks, DirecTV Latin America, GenTek, Federal-Mogul, Hayes Lemmerz, Exide Technologies, The IT Group, Encompass Services Corporation, NationsRent, Polaroid Corporation, Acterna, Magellan Health Services, National Century Financial Enterprises, Integrated Health Services, Vencor, Inc., Sun Healthcare Group, Inc., Mariner Post-Acute & Mariner Health, Genesis Health & MultiCare, Conseco, Inc., and Conseco Finance Corp., Reliance Group Holdings & Reliance Financial, The FINOVA Group, Inc., Comdisco, Bridge Information Services, Loewen Group, and Harnischfeger Industries, Inc. ================================================================= [ ] YES! Please enter my personal subscription to DII & KBR BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) DII & KBR BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of DII & KBR BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF DII & KBR ----------------------------------------------------------------- DII Industries, LLC 1401 McKinney Street, Suite 2400 Houston, Texas 77010 Kellogg, Brown & Root, Inc. 4100 Clinton Drive Houston Texas 11020-6299 DII Industries and Kellogg, Brown & Root and their subsidiaries are affiliated companies and are subsidiaries of Halliburton Company (NYSE: HAL). DII has no business operations. Kellogg, Brown & Root is engaged in the engineering and construction business, providing a wide range of services to energy and industrial customers and government entities in over 100 countries. KBR's businesses offer integrated services and solutions relating to all phases of design, procurement, construction, project management and maintenance of facilities primarily for energy and government customers. The engineering and construction business includes five product and service lines: (A) Onshore operations -- consist of engineering and construction activities, including engineering and construction of liquefied natural gas, ammonia, crude oil refineries and natural gas plants. (B) Offshore operations -- include offshore deepwater engineering and marine technology and worldwide construction capabilities. (C) Government operations -- provide engineering operations, construction, maintenance and logistics activities for government facilities and installations. (D) Operations and maintenance -- include plant operations, construction, maintenance, and start-up services for both upstream and down stream oil, gas and petrochemical facilities, as well as engineering, operations, maintenance, and logistics services for the power, commercial and industrial markets. (E) Infrastructure -- provides civil engineering, construction, consulting and project management services. DII and KBR are defendants in tens of thousands of asbestos and silica-related personal-injury lawsuits pending in various parts of the United States. The plaintiffs in these suits seek damages for injuries allegedly caused by exposure to asbestos or silica in products manufactured, used or sold by any of the companies' subsidiaries, former divisions or predecessors. Since 1976, over 671,000 asbestos-related personal-injury claims have been filed against DII, KBR and certain of their affiliates. The companies face some 4,200 silica-related claims based on the most recent count. The companies did their best to restructure, isolate and contain toxic tort claims for years. Negotiations beginning in 2002 culminated in an agreement in principle that, if and when consummated, would result in a settlement of asbestos and silica personal injury claims against DII, KBR and their current and former subsidiaries with United States operations. During 2003, Albert O. Cornelison, Executive Vice President and General Counsel of Halliburton, relates, DII and KBR entered into definitive written agreements finalizing the terms of the agreement in principle with attorneys representing more than 90% of the current asbestos and silica claimants. Those definitive agreements provide that: -- up to approximately $2,775,000,000 in cash, 59,500,000 Halliburton shares (valued at $1,400,000,000 using the stock price at September 30, 2003 of $24.25 per share) and notes with a net present value of less than $100,000,000 will be paid to one or more trusts for the benefit of current and future asbestos and silica personal injury claimants upon receiving final and non- appealable court confirmation of a reorganization plan; -- DII Industries and Kellogg Brown & Root will retain rights to the first $2,300,000,000 of any insurance proceeds, with any proceeds received between $2,300,000,000 and $3,000,000,000 going to the trust; -- the agreement is to be implemented through a pre-packaged filing under Chapter 11 of the United States Bankruptcy Code for DII Industries, Kellogg Brown & Root and some of their subsidiaries with United States operations; and -- the funding of the trusts would occur upon receiving final and non-appealable court confirmation of a reorganization plan for DII Industries and Kellogg Brown & Root and some of their subsidiaries with United States operations in the Chapter 11 proceeding. DII and KBR now look to the bankruptcy court for final relief from the endless litigation. Under a pre-packaged reorganization plan negotiated with key parties-in-interest, the companies propose to create a trust to pay tort claims; to channel all tort claims to that trust; to fund the trust with cash, Halliburton stock, some new notes, and some of the companies' interests in insurance policies; and to enjoin claimants from enforcing judgments against the companies. The proposed plan and a disclosure statement explaining the plan have been widely circulated, filed with the Securities and Exchange Commission, and are available at no charge at: http://www.dresser-kbr-prepack.com/ The Companies want the Bankruptcy Court to put their reorganization on a fast track. Because the Disclosure Statement has been circulated for months before the bankruptcy filing, the companies ask the court to collapse the traditional disclosure statement and confirmation hearings into one hearing. Approval of any plan affecting asbestos-related personal injury claims will need the ultimate approval by both a Bankruptcy Court judge and a U.S. District Court judge. Not a Typical Bankruptcy Case Bruce A. Stanski, KBR's Chief Financial Officer, tells the Bankruptcy Court that "this is not a typical Chapter 11 case and does not involve debtors in financial distress." The Companies will be filing their Pre-arranged Plan to take advantage of the unique provisions available to them under the U.S. Bankruptcy Code to bring finality to their tort litigation-related claims. Mr. Stanski stresses that the company is not coming to the bankruptcy court because of any financial difficulties. "The Debtors are solvent entities," Mr. Stanski says. Assuming that the Plan takes effect on March 31, 2004, Reorganized DII, of which KBR will be a wholly owned subsidiary, projects a return to profitability: DII Industries, LLC Projected Pro Forma Statements of Income (In $ Millions) Projected For The Year Ending December 31, 2003 2004 2005 2006 ---- ---- ---- ---- Revenues $8,536 $8,033 $6,477 $6,697 Operating costs and expenses 8,606 7,847 6,267 6,430 Operating income (70) 186 210 267 Interest expense (24) (69) (51) (13) Interest income 20 24 5 5 Foreign currency gains (losses) (11) -- -- -- Income before taxes and minority interest (85) 141 164 259 Provision for income tax 13 (55) (64) (101) Minority interest (20) (20) (22) (24) ------ ------ ------ ------ Net income ($92) $66 $78 $134 ====== ====== ====== ====== EBITDA ($18) $218 $261 $308 ====== ====== ====== ====== Operating income margin -0.82% 2.31% 3.24% 3.99% ====== ====== ====== ====== EBITDA margin -0.20% 2.72% 4.03% 4.60% ====== ====== ====== ====== Additionally, Reorganized DII projects that its Balance Sheet will show: DII Industries, LLC Projected Pro Forma Balance Sheets (In $ Millions) Projected At December 31, 2003 2004 ---- ---- Assets Current assets: Cash and equivalents $250 $250 Notes and accounts receivable, unbilled work on uncompleted contracts, net 2,133 1,627 Inventories 32 30 Other current assets 100 98 ------ ------ Total current assets 2,515 2,005 Net property, plant, and equipment 534 589 Equity in and advances to related companies 159 183 Intercompany with Parent 631 (1,553) Goodwill, net 320 320 Noncurrent deferred income taxes 470 408 Insurance for asbestos-related and silica-related claims personal-injury claims 2,302 1,902 Rights to Halliburton shares 1,428 0 Other assets 377 301 ------ ------ Total assets $8,736 $4,155 ====== ====== Liabilities and Shareholder's equity Current liabilities: Short-term notes payable $4 $4 Current maturities of long-term debt 19 35 Accounts payable 558 378 Accrued employee compensation and benefits 106 105 Accrued interest payable 6 0 Advanced billings on uncompleted contracts 665 328 Income taxes payable 1 3 Other current liabilities 339 146 ------ ------ Total current liabilities 1,698 999 Long-term debt 183 265 Employee compensation and benefits 226 226 Asbestos-related and silica-related personal-injury claims 4,033 0 Minority interest in consolidated subsidiaries 77 86 Other liabilities 107 107 ------ ------ Total liabilities 6,324 1,683 Total shareholder's equity 2,412 2,472 ------ ------ Total liabilities and shareholder's equity $8,736 $4,155 ====== ====== ----------------------------------------------------------------- [00002] HALLIBURTON'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILINGS ----------------------------------------------------------------- HOUSTON, Texas -- December 16, 2003 -- Halliburton (NYSE: HAL) announced today that it is moving ahead with its previously announced plan to resolve its asbestos and silica liabilities through a prepackaged bankruptcy involving several of its subsidiary companies. The company's DII Industries, Kellogg Brown & Root ("KBR") and other affected subsidiaries filed Chapter 11 proceedings today in bankruptcy court in Pittsburgh, Pennsylvania. The cases have been assigned to the Honorable Judith K. Fitzgerald. The affected subsidiaries will continue to be wholly owned by Halliburton and will continue their normal operations. Halliburton Company, the company's Energy Services Group and KBR's government services business are not included in the bankruptcy filing. Halliburton will host a conference call on Wednesday, December 17, 2003, to discuss the Chapter 11 proceedings. The call will begin at 10:00 AM Central Time (11:00 AM Eastern Time). Please visit our website to listen to the call live via webcast. A replay will be available on our web site for seven days following the event. In addition, you may participate in the call by telephone at (913) 981-4900. The balloting agent tabulating the votes on the proposed plan of reorganization advised Halliburton that valid votes were received from over 386,000 asbestos claimants and over 21,000 silica claimants, representing substantially all known claimants and meeting the voting requirements of section 524(g) of the Bankruptcy Code. Of the votes validly cast, over 98% of asbestos claimants and over 99% of silica claimants have voted to accept the proposed plan of reorganization. Halliburton also announced that the pre-filing internal reorganization of Halliburton subsidiaries described in the solicitation materials for the proposed plan of reorganization was completed as of Monday, December 15, 2003. In addition, Halliburton's offer to issue 7.6% debentures in exchange for outstanding 7.60% debentures of DII Industries has been completed, and Halliburton issued $294 million of its 7.6% debentures on December 15, 2003 in exchange for a like amount of DII debentures. In connection with reaching agreement with representatives of asbestos and silica claimants to limit to $2.775 billion the cash required to settle pending claims subject to definitive agreements, DII Industries agreed to pay $326 million of the $2.775 billion cash amount prior to the Chapter 11 filing. These payments were made today prior to the Chapter 11 filing. As a result of filing the Chapter 11 proceedings, Halliburton will increase its accrual for current and future asbestos and silica claims to reflect the full amount of the proposed settlement, which will result in a pretax charge of approximately $1 billion in the fourth quarter of 2003. The tax effect on this charge is minimal, as a valuation allowance will be established for the incremental loss carryforward. The after tax effect of this charge on diluted earnings per share is approximately $2.29. The fourth quarter financial statements will reflect a reclassification of charges from continuing to discontinued operations reflecting our latest estimate of the actual claims split between continuing and discontinued operations compared to what we had previously recorded prior to completing a substantial portion of the due diligence procedures. Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The Company serves its customers with a broad range of products and services through its Energy Services and Engineering and Construction Groups. The Company's World Wide Web site can be accessed at http://www.Halliburton.com/ ----------------------------------------------------------------- [00003] DII & KBR DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtors filing separate Chapter 11 petitions: Debtor Entity Bankruptcy Case No. ------------- ------------------- Mid-Valley, Inc. 03-35592 DII Industries, LLC 03-35593 Kellogg Brown & Root, Inc. 03-35595 KBR Technical Services, Inc. 03-35596 Kellogg Brown & Root Engineering Corporation 03-35597 Kellogg Brown & Root International, Inc. 03-35599 Kellogg Brown & Root International, Inc. 03-35600 BPM Minerals, LLC 03-35601 Chapter 11 Petition Date: December 16, 2003 Bankruptcy Court: United States Bankruptcy Court Western District of Pennsylvania 5414 U.S. Steel Tower 600 Grant Street Pittsburgh, PA 15219 Telephone (412) 644-2700 Bankruptcy Judge: The Honorable Judith K. Fitzgerald Circuit: Third Debtors' Counsel: Jeffrey N. Rich, Esq. Kirkpatrick & Lockhart LLP 599 Lexington Avenue New York, NY 10022-6030 Telephone (212) 536-4097 Fax (212) 536-3901 http://www.kl.com - and - Michael G. Zanic, Esq. Eric T. Moser, Esq. Kirkpatrick & Lockhart LLP Henry W. Oliver Bldg. 535 Smithfield Street Pittsburgh, PA 15222-2312 Telephone (412) 355-6500 Fax (412) 355-6501 http://www.kl.com Debtors' Special Counsel: Frank H. Griffin, III, Esq. Gollatz, Griffin & Ewing, P.C. Four Penn Center, Suite 200 1600 John F. Kennedy Boulevard Philadelphia, PA 19103-2808 Telephone (215) 563-9400 Fax (215) 665-9988 http://www.ggelaw.com Debtors' Asbestos & Silica Consultants: Dr. Francine F. Rabinovitz Hamilton, Rabinovitz & Alschuler, Inc. 6033 W. Century Boulevard, Suite 890 Los Angeles, CA 90045 Telephone (310) 645-9000 Fax (310) 645-8999 http://www.hra-inc.com Debtors' Claims and Noticing Agent: Lorenzo Mendizabal The Trumbull Group f/k/a Trumbull Associates, LLC and Trumbull Services, LLC 4 Griffin Road North Windsor, CT 06095 Telephone (860) 687-5401 Fax (860) 683-8697 http://www.trumbullgroup.com Debtors' Restructuring & Tax Accountants: Thomas D. Bibby KPMG LLP Dallas, TX http://www.kpmg.com Counsel to the Prepetition Asbestos Committee: Elihu Inselbuch, Esq. Caplin & Drysdale 399 Park Avenue New York, NY 10022 Telephone (212) 319-7125 http://www.capdale.com Counsel to Halliburton: Jack L. Kinzie, Esq. Baker Botts, L.L.P. 2001 Ross Avenue Dallas, TX 75201 Telephone (214) 953-6500 Fax (214) 953-6503 http://www.bakerbotts.com Debtors' Proposed Future Claimants' Representative: Eric D. Green, Esq. Resolutions LLC 222 Berkeley Street Boston, MA 02116 Telephone (617) 556-0800 Fax (617) 556-9900 U.S. Trustee: Joseph S. Sisca, Esq. Assistant U.S. Trustee Office of the United States Trustee Liberty Center 1001 Liberty Avenue, Suite 970 Pittsburgh, PA 15222 Telephone (412) 644-4756 Fax (412) 644-4785 ----------------------------------------------------------------- [00004] LIST OF THE DEBTORS' LARGEST COMMERCIAL CREDITORS ----------------------------------------------------------------- The Debtors propose to pay all undisputed prepetition non-tort claims in full in the ordinary course of business and intend to prosecute a series of motions this week to make that happen. Without providing any further detail, the Debtors' first-day bankruptcy papers filed with the Bankruptcy Court in Pittsburgh provide parties-in-interest with a list of the Debtors' largest commercial creditors: Atlantic Relocation Systems Brazos Pipe & Steel Fab., Inc. Butler Machinery Company Challenger Pallet & Supply, Inc. Ciba Specialty Chemicals Corp. City Moving Systems Colony Construction, Inc. Dakota, Minnesota & Eastern Railroad Demag Delaval Turbomachinery Corp Doncasters Paralloy Elliott Company Flowserve US Inc. GE Supply GK Construction, Inc. Hulett Post & Pole, Inc. ICBP International Piping Systems, Ltd. Jett Weld Inc. Leistritz Corporation Lockwood International Inc. Mohawk Steel Co. Nordon Cryogenie SAS Petrofac LLC Plant Performance Services LLC Powell Electrical Mfg. Co. Puffer-Sweiven, Inc. S & S Trucking, Inc. Schneider Electric S.A. Sprague Energy Stupp Corporation T C Clarage, Inc. US Contractors Inc. Wholesale Electric Supply Co., Inc. Wyoming Machinery Company ----------------------------------------------------------------- [00005] LIST OF THE DEBTORS' 30-LARGEST ASBESTOS CREDITORS ----------------------------------------------------------------- Debtors' 30 Largest Asbestos Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Diane Lester Asbestos Personal $2,883,196 Law Offices of Peter G. Injury Settlement Angelos, P.C. or Verdict One Charles Center 100 North Charles Street, 22nd Floor Baltimore, MD 21201 Antonio Colella Asbestos Personal $1,535,948 Law Offices of Peter G. Injury Settlement Angelos, P.C. or Verdict One Charles Center 100 North Charles Street, 22nd Floor Baltimore, MD 21201 Leroy F. Lane, Sr. Asbestos Personal $1,288,332 Law Offices of Peter G. Injury Settlement One Charles Center or Verdict 100 North Charles Street, 22nd Floor Baltimore, MD 21201 Charles J. Habig Jr. Asbestos Personal $1,274,422 Law Offices of Peter G. Injury Settlement One Charles Center or Verdict 100 North Charles Street, 22nd Floor Baltimore, MD 21201 L.D. Easterwood Asbestos Personal $829,170 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel Beaumont, TX 77701 Dock Shaheen Farris Asbestos Personal $829,170 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Ralph S. Knopf Asbestos Personal $829,170 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Cornelius C. Sellers Asbestos Personal $829,170 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 John E. Shelton Asbestos Personal $749,250 Waters & Kraus Injury Settlement 3219 McKinney Avenue or Verdict Dallas, TX 75204 Oscar Kelley Bell, Sr. Asbestos Personal $666,000 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 William Harold Benford Asbestos Personal $666,000 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Samuel S. Freeman Asbestos Personal $666,000 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Elbert Harris Asbestos Personal $666,000 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Noah Harris Johnson Asbestos Personal $666,000 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Jimmy Clyde Dunbar Asbestos Personal $663,669 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Avery A. Parsons Asbestos Personal $663,669 Reaud, Morgan & Quinn, Inc. Injury Settlement 801 Laurel or Verdict Beaumont, TX 77701 Herrel W. Kilough Asbestos Personal $616,050 Waters & Kraus Injury Settlement 3219 McKinney Avenue or Verdict Dallas, TX 75204 Charles M. Cargilc Asbestos Personal $609,912 Law Offices of Peter G. Injury Settlement One Charles Center or Verdict 100 North Charles Street, 22nd Floor Baltimore, MD 21201 Carlos Martinez Asbestos Personal $600,000 Kazan, McClain, Edises, Injury Settlement Abrams, Fernandez & Farisse or Verdict 171 Twelfth Street Suite 300 Oakland, CA 94607 Ronald Simmons Asbestos Personal $600,000 Kazan, McClain, Edises, Injury Settlement Abrams, Fernandez & Farisse or Verdict 171 Twelfth Street Suite 300 Oakland, CA 94607 J.B. Gentry Asbestos Personal $500,000 Kazan, McClain, Edises, Injury Settlement Abrams, Fernandez & Farisse or Verdict 171 Twelfth Street Suite 300 Oakland, CA 94607 Manuel Jimenez Asbestos Personal $500,000 Kazan, McClain, Edises, Injury Settlement Abrams, Fernandez & Farisse or Verdict 171 Twelfth Street Suite 300 Oakland, CA 94607 Patricia McNally Asbestos Personal $500,000 Kazan, McClain, Edises, Injury Settlement Abrams, Fernandez & Farisse or Verdict 171 Twelfth Street Suite 300 Oakland, CA 94607 Vincent DePalma Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 James Foster Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 Percy Jackson Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 Wayne Simpson Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 James R. Terry Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 Leonard Toebe Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 Gary Vaughn Asbestos Personal $499,500 Kneske & Reeves, LLP Injury Settlement 6301 Gaston Ave, Suite 735 or Verdict Dallas, TX 75214 ----------------------------------------------------------------- [00006] INSURERS' MOTION TO DISMISS CHAPTER 11 PROCEEDING ----------------------------------------------------------------- An army of lawyers from the law firms of Wilmer Cutler & Pickering; Meckler, Bulger & Tilson; Hogan & Hartson L.L.P.; Picadio Sneath Miller & Norton, P.C.; and Sonnenschein Nath & Rosenthal LLP, led by Samuel R. Grego, Esq., and Vinita K. Sinha, Esq., at DKW Law Group LLC in Pittsburgh; marched to the Bankruptcy Court yesterday at the request of their clients: * Appalachian Insurance Company, * First State Insurance Company, * Hartford Accident and Indemnity Company, * Hartford Casualty and Insurance Company, * New England Insurance Company, * Twin City Fire Insurance Company, * Zurich American Insurance Company, * Zurich Insurance Company (Switzerland), and * Zurich International (Bermuda), Ltd. The insurers want Judge Fitzgerald to dismiss the DII and KBR Chapter 11 proceedings. The insurers argue that these are bad faith bankruptcy filings and should be dismissed for the same reasons SGL Carbon Corp.'s graphite electrode antitrust litigation-driven cases were ordered dismissed by the U.S. Court of Appeals for the Third Circuit in 1999. See 200 F.3d 154. Abuse and Misuse The DII and KBR Chapter 11 cases are a new and abusive kind of bankruptcy, the Insurance Companies say. They serve no reorganizational purpose and they have the potential to do substantial harm to both creditors and the integrity of the bankruptcy system. The DII and KBR bankruptcy cases, the Insurers charge, were orchestrated by Halliburton in order to raise HAL's stock price and gain a litigation advantage. HAL's already told the insurers that it intends to do everything it can to recoup every dollar it pays to settle claims by tapping into $3,000,000,000 of insurance proceeds underlying a series of insurance policies written from 1972 to 1985. HAL's objective is to escape from its liability at no cost. While HAL will advance funds to the trust, it will then turn around and collect from the Insurance Companies. The Insurers give three reasons why dismissal is appropriate: (A) The Debtors have no need to reorganize. They are solvent, profitable and fully capable of satisfying all of their liabilities -- asbestos, silica and commercial -- now and in the future. (B) The Proposed Plan is inconsistent with the purposes of the bankruptcy code, violates the absolute priority rule, and misuses the asbestos trust provisions in Section 524(g). (C) The Plan's proposed channeling injunction points future claimants to an artificially limited trust fund for payment of their claims and that raises a serious constitutional problem. These Chapter 11 cases are not about reorganizing a failing business, the Insurers say. No jobs or employee benefits are at stake. No creditor is at risk of nonpayment. No business operations are impaired. No contracts need to be rejected or renegotiated. Instead, the Insurers complain, these cases are solely about boosting HAL's stock price at the expense of future claimants and insurers. Future Claimants Suffer The settlement, the Insurers calculate, delivers 7-1/2 the Debtors' historical average settlement cost per claim. That, the Insurers say, is what bought the votes supporting the Plan. In return for these inflated payments, present claimants are unfairly impairing the ability of future claimants to collect. If the trust goes bust, future claimants are out of luck if the Plan's confirmed. Future claimants would be better off without the Plan, the Insurers tell the Court. Ignore the Insurers The Insurers, Jeffrey N. Rich, Esq., at Kirkpatrick & Lockhart LLP, tells the Court in a Preliminary Response, do not have standing in these Chapter 11 cases. The DII and KBR restructuring proceeding do not affect the Insurers because: (1) The Debtors, without contribution from any insurer, are funding the Asbestos PI Trust and Silica PI Trust; (2) The Plan does not assign Debtors insurance rights -- in fact, the Debtors retain such rights and the insurance coverage disputes will be resolved in litigation separate and apart from these Reorganization Cases; and (3) The Plan contains an express "super-preemptory provision" ensuring that nothing in the Plan impairs the rights of any party to an insurance policy. The Debtors ask Judge Fitzgerald to consider the Insurers' standing in these cases as quickly as possible and rule that they cannot participate. The Plan negotiation process has lasted for more than 18 months so far. The resulting Plan has been met with overwhelming support (over 98% of asbestos claimants, and over 99% of silica claimants) from the only creditors who are impaired under the Plan -- the holders of Asbestos Unsecured PI. Delay is not what these cases need; the Debtors want to emerge from bankruptcy in the first quarter of next year, not another year or more from now. *** End of Issue No. 1 ***