McDermott asbestos settlement that gives it full ownership of Babcock & Wilcox

By Caroline Salls

Pittsburgh, Aug. 29 - McDermott International, Inc. and subsidiary The Babcock & Wilcox Co. agreed to a revised asbestos settlement agreement that will give McDermott full ownership of Babcock & Wilcox, according to a McDermott news release.

Under the proposed agreement:

* McDermott will retain full ownership of Babcock & Wilcox and its subsidiaries following the effective date of its plan of reorganization;

* The new McDermott plan of reorganization reflecting the proposed settlement agreement must reach a final, non-appealable effective date by Feb. 22.

If the new plan of reorganization is not effective by that date, the parties will return to the existing plan of reorganization now pending approval in the district court;

* On the effective date, McDermott will pay the asbestos personal injury trust $350 million and will also assign to the trust all insurance rights that were to be assigned under the previous proposed agreement;

* Also on the effective date, Babcock & Wilcox will issue a $250 million contingent promissory note, and McDermott will provide a $355 million contingent payment right, both of which will be subject to passage of the Fairness in Asbestos Injury Resolution Act of 2005;

* The $250 million contingent promissory note will be secured by 100% of the Babcock & Wilcox shares and guaranteed by McDermott and Babcock & Wilcox Investment Co. The promissory note will bear interest at 7%, with a five-year term;

* The $355 million contingent payment right will be payable within 180 days after Nov. 30, 2006, will accrue interest at 7% and will be secured by the Babcock & Wilcox shares, until the payment is funded;

In exchange for the payments and assignments, Babcock & Wilcox will receive a full release from any and all Babcock & Wilcox-related asbestos claims, with those claims being channeled to the trust.

All non-debtor McDermott companies will receive a release and protection from all asbestos claims derived from Babcock & Wilcox's use of asbestos.

"This agreement will ensure that B&W will remain part of McDermott's future, thereby providing continuity and stability for B&W employees and retirees, as well as reassurance to all its customers who

entrust it with large, multi-year capital projects," McDermott chairman of the board and chief executive officer Bruce W. Wilkinson said in the release.

"It should help expedite the resolution of the bankruptcy process, which has lasted over 5½ years, and enable compensation to finally flow to claimants who have suffered the impact of asbestos-related diseases."

McDermott International is a New Orleans-based energy services company. It acquired Babcock & Wilcox in 1978. Babcock & Wilcox filed for Chapter 11 bankruptcy in 2000 and, although it is still managed by McDermott, has been deconsolidated from McDermott's financial statements.

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