Federal-Mogul asbestos trust agrees with Icahn on liquidity, Icahn sees early exit from Chapter 11

New York, Sept. 30 - Federal-Mogul Corp. said Carl Icahn has agreed to provide the proposed asbestos trust with liquidity, either by buying the trust's equity position in the company after it emerges from bankruptcy or through other financing.

The agreement was made between Icahn and the asbestos committee in Federal-Mogul's Chapter 11 case.

In addition, the asbestos committee has agreed that the trust will satisfy its indemnification obligations to the company by delivering part of its equity back to the company.

The announcement follows an agreement earlier in the week between Federal-Mogul and its U.K. administrators under which the company will retain the businesses and other assets of its U.K. affiliates in return for cash and reserves that will be used to make a distribution to U.K. creditors.

"We are pleased with the support and collaboration in the recent months from Mr. Icahn, our plan proponents and stakeholders," said Federal-Mogul chairman, president and chief executive officer Jose Maria Alapont in a news release. "We will welcome Mr. Icahn's potential increased stake in the emerging and reorganized company."

According to the release Icahn "stated that he was extremely pleased by the settlement agreement among the parties and was gratified that he was able to lend assistance to the settlement process. He further stated that he looked forward to the company's early emergence from Chapter 11, especially at a time when it appeared that other companies in the auto parts industry were moving in the opposite direction."

Under the agreement with the asbestos trust, the trust will pay Federal-Mogul $125 million to cover amounts to be paid for U.K. asbestos claims. That figure will be in the form of a note that matures 10 business days after the reorganization becomes effective, being exchanged at maturity for 13.88% of the trust's distribution of stock in Federal-Mogul. The trust will receive in total 50.1% of the company's equity in the reorganization.

However, 32% of the 13.88% will be held in escrow while the Chester Street claims are resolved. The stock held in escrow will be offered to Icahn. If he declines the trust can sell the stock in the market.

In addition, Icahn will have the option to buy within 50 days the remaining 86.12% of the 50.1% stake in Federal-Mogul held by the asbestos trust at a price of $775 million, made up of $375 million in cash and a $400 million seven-year note paying interest at Libor plus 100 basis points, capped at 5.5%. The note will be issued by High River LP or American Real Estate Partners LP.

If Icahn does not buy the stock, he will provide a $100 million term facility secured by the remaining stock held by the trust. The facility will carry interest at Libor plus 100 basis points, capped at 5.5%, and mature after four years.

The agreement with the U.K. administrators also includes High River.

Under its terms, the U.K. administrators will use the cash at the U.K. companies to:

* Pay £193 million to the T&N Retirement Benefits Scheme to settle its claims against T&N;

* Pay £33 million to the U.K. asbestos trust;

* Pay £5.5 million to Federal-Mogul towards Chapter 11 costs as an expense of the T&N administration;

* Pay £22 million from a reserve to Chester Street against Chester Street claims;

* Pay to creditors of companies other than T&N from a reserve of £115.97 million;

* Pay T&N's general unsecured creditors from a reserve of £5.5 million;

* Pay asbestos property damage claimants from a reserve of £5.5 million;

* Pay the costs of the administrators and their advisors from a reserve of £33 million.

Federal-Mogul, a Southfield, Mich.-based auto parts manufacturer, filed for bankruptcy on Oct. 1, 2001 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 01-10578.

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