Kaiser Aluminum obtains approval of intercompany settlement agreement

By Ellen Chang

Houston, Feb. 1 - Kaiser Aluminum announced that the U.S. Bankruptcy Court for the District of Delaware approved its intercompany settlement agreement.

The agreement resolves the treatment of intercompany claims among the various Kaiser companies in bankruptcy arising from pre- and post-Chapter 11 transactions between them.

"The ISA demonstrates that the company has reached common ground with the vast majority of its significant creditors," said Jack A. Hockema, Kaiser's president and chief executive officer, in a statement.

"We are gratified that all of the major creditor constituencies were able to come to agreement on these complex issues in a positive and productive way," he said.

"In conjunction with the commitment letter for our new financing arrangement, court approval of our settlement with the Pension Benefit Guaranty Corp., and last week's term sheet addressing the mechanisms for resolving personal injury claims, we believe the company has now passed another major milestone in our path to emergence from Chapter 11," he said.

Hockema said the company plans to file its plan of reorganization and disclosure statement within the next few months.

The court also said it will hold a Feb. 8 hearing to consider approval of Kaiser's new debtor-in-possession and exit financing arrangement.

Kaiser Aluminum reached an agreement on personal injury claims relating to asbestos, silica, coal tar pitch and noise on Jan. 28.

In response, objections to its proposed inter-company settlement agreement have been withdrawn.

Under the proposed agreement, Kaiser will create one or more trusts that will take over liability for personal injury claims.

Funding for the trust will come from:

* Proceeds from post-bankruptcy filing insurance settlements for covered personal injury claims plus money currently held in court-established escrow accounts;

* Rights to proceeds under certain insurance policies for covered personal injury claims;

* Assumption by the trust and control of litigation or settlement of insurance coverage litigation for covered personal injury claims after completion of Kaiser's reorganization;

* $13 million in cash from the company;

* Distributions that will be paid on 75% of the unsecured intercompany claim held by Kaiser Finance Corp. against Kaiser Aluminum & Chemical Corp., to be paid in the form of equity in the reorganized Kaiser Aluminum;

* All the stock of a subsidiary of Kaiser Aluminum & Chemical, whose sole asset will be a piece of real property that produces "modest" rental income.

Kaiser agreed the term sheet with the unsecured creditors committee, the United Steelworkers of America, the Pension Benefit Guaranty Corp., the official committee for asbestos claimants, the representative for future asbestos claimants, and the representative for future silica and coal tar pitch volatiles claimants.

Kaiser, a Houston-based aluminum company, filed for bankruptcy on Feb. 12, 2002. Its Chapter 11 case number is 02-10429.

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