Babcock & Wilcox plan of reorganization confirmed

By Caroline Salls

Pittsburgh, Jan. 17 - The Babcock & Wilcox Co.'s plan of reorganization and related Citgo settlement agreement were confirmed Tuesday by the U.S. Bankruptcy Court for the Eastern District of Louisiana.

"This is an important day for McDermott, our shareholders, B&W's customers and the asbestos-related claimants," McDermott chairman and chief executive officer Bruce W. Wilkinson said in a company news release.

"After close to six years in the courts, it appears that the resolution of B&W's bankruptcy is imminent. There is still work to be accomplished in this process, but I am looking forward to soon having the B&W business back for shareholders as part of McDermott's reported financial results."

Under the settlement between Babcock & Wilcox, parent company McDermott International Inc., Citgo Petroleum Corp., PDV Midwest Refining LLC and some insurers, Babcock & Wilcox will pay $7.5 million on the effective date of the plan to Citgo and the insurers.

The parties also agreed to limit Babcock & Wilcox's maximum uninsured exposure to $50 million and all claims against McDermott will be released.

To receive any payment beyond $7.5 million, Citgo and the insurers must obtain a more than $250 million judgment against Babcock & Wilcox, and the excess amount must be completely uncollectible against Babcock & Wilcox's insurers and/or its insurance broker.

If the judgment is obtained but more than $250 million is collected from Babcock & Wilcox's insurers or brokers, Babcock & Wilcox can be reimbursed up to $5 million of its first payment.

Therefore, the minimum Citgo settlement cost to Babcock & Wilcox is $2.5 million, while the maximum total uninsured exposure is $50 million.

The settlement also requires McDermott's shareholder approval, exit financing for Babcock & Wilcox and the completion of other conditions in order for the proposed settlement to become effective by Feb. 22, the effective date deadline under the plan.

Babcock & Wilcox is the Barberton, Ohio-based subsidiary of McDermott International that designs, supplies and services power generation systems and equipment.

Babcock & Wilcox filed for bankruptcy on Feb. 22, 2000 as a result of asbestos-related claims.

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