Babcock & Wilcox plan confirmation, Citgo settlement agreement approval recommended by court

By Caroline Salls

Pittsburgh, Dec. 29 - The Babcock & Wilcox Co.'s plan of reorganization and related Citgo settlement agreement received a confirmation recommendation Wednesday by the U.S. Bankruptcy Court for the Eastern District of Louisiana and will move on to district court for a final ruling, according to a company news release.

As part of the confirmation process, agreements were reached with all plan objectors, including those parties who had objected to the previous B&W plan.

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

The parties also agreed to limit B&W'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 B&W, and the excess amount must be completely uncollectible against B&W's insurers and/or its insurance broker.

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

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

In addition to obtaining a final plan confirmation ruling, the settlement requires McDermott's shareholder approval, exit financing for B&W 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.

According to the release, all claimant classes have voted in favor of the plan.

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

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

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