Meritor subsidiary Maremont in bankruptcy to resolve asbestos claims

By Caroline Salls

Pittsburgh, Jan. 22 – Meritor, Inc. non-operating subsidiary Maremont Corp. and Maremont’s three wholly owned non-operating subsidiaries, Maremont Exhaust Products, Inc., AVM, Inc. and Former Ride Control Operating Co., Inc., made a pre-packaged Chapter 11 bankruptcy filing Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Meritor said the holders of asbestos claims, the only voting class under Maremont’s pre-packaged Chapter 11 plan of reorganization, voted unanimously to accept the plan before the bankruptcy filing was made.

Meritor and its other non-debtor subsidiaries are not part of the Chapter 11 filing and will continue to operate as usual, but will receive releases and other protections under the terms of the plan, according to a news release.

“Through this process, Maremont is seeking a constructive and equitable resolution for claimants by establishing a trust that will treat all individuals fairly and consistently while definitively addressing its historical asbestos-related liabilities,” Meritor chief executive officer and president Jay Craig said in the release.

“Meritor’s financial position is strong, and we remain focused on serving our customers, driving operational excellence and achieving our business objectives.”

Plan terms

Meritor said the Maremont plan is intended to permanently resolve all current and future asbestos claims through the creation of a trust pursuant to Section 524(g) of the Bankruptcy Code.

If the plan is confirmed by the bankruptcy court and approved by the district court and all other actions necessary to implement the plan are completed, Maremont will fund a trust to address its current and future asbestos claims and permanently prohibit any future lawsuits related to those claims.

Funding for the 524(g) trust will consist of a $28 million contribution by Meritor, together with a contribution of Maremont’s remaining assets, including roughly $21 million in cash and intercompany loan receivables less certain amounts needed to pay for the administrative costs of the Chapter 11 cases, as well as its remaining insurance assets.

All claims other than asbestos claims against Maremont and its subsidiary debtors will be paid in full or reinstated.

Meritor’s equity interests in Maremont will be cancelled. The 524(g) trust will own 100% of the equity interests in reorganized Maremont.

Asbestos background

According to the release, Maremont manufactured friction products containing asbestos from 1953 through 1977, when it sold its friction product business, and one of its subsidiaries manufactured exhaust products containing asbestos from 1954 to 1978, when it ceased using asbestos in those products. Arvin Industries, Inc., a predecessor of Meritor, acquired Maremont in 1986.

The company said Maremont and many other companies are defendants in lawsuits brought by individuals claiming personal injuries as a result of exposure to asbestos-containing products.

There were about 1,900 and 2,800 active asbestos-related lawsuits against Maremont and its subsidiary Maremont Exhaust Products, Inc. as of Dec. 31, 2018 and Dec, 31, 2017, respectively.

Debt details

According to court documents, Maremont has $10 million to $50 million in assets and $100 million to $500 million in debt.

All of the unsecured claims listed by the debtors were asbestos personal injury claims in unliquidated amounts.

The Maremont debtors are represented in the Chapter 11 cases by Sidley Austin LLP and Cole Schotz PC.

Meritor, Inc. is a Troy, Mich.-based global supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets. The Chapter 11 case number is 19-10118.

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