Babcock & Wilcox emerges from Chapter 11, financials reconsolidated with parent McDermott

By Caroline Salls

Pittsburgh, Feb. 22 - The Babcock & Wilcox Co. (B&W) emerged from Chapter 11 bankruptcy Wednesday and its financial results will be reconsolidated with those of parent McDermott International Inc., according to a company news release.

B&W has also finalized and implemented its exit-financing package and has funded its initial payment to the asbestos-claimants' trust.

B&W said it paid $350 million and assigned rights to $1.15 billion of insurance to the claimants' trust. Depending on the status of national asbestos legislation at Nov. 30, 2006, either an additional $25 million or $605 million in consideration will be made available to the trust.

B&W's exit-financing package consists of three tranches for a combined total of $650 million of credit capacity; providing liquidity for letter-of-credit requirements, working capital needs and the possibility of refinancing the $250 million contingent note that was issued to the claimants' trust.

"This is a transformational event for McDermott and B&W, as well as for our shareholders, employees, customers and suppliers," McDermott chairman and chief executive officer Bruce W. Wilkinson said in the release.

"Six years to the day since its original filing, B&W emerges at the commencement of an exciting time in the power generation industry. Electricity demand in the United States is growing, environmental requirements for our customers require new technologies, coal remains an abundant and cost-effective domestic fuel source and new power plants are being planned."

The U.S. Bankruptcy Court for the Eastern District of Louisiana confirmed the company's plan of reorganization and related Citgo settlement agreement Jan. 17.

Under the settlement between Babcock & Wilcox, McDermott, Citgo Petroleum Corp., PDV Midwest Refining LLC and some insurers, Babcock & Wilcox will pay $7.5 million 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.

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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