Halliburton bankrupts own units
|17th Dec 2003
||Questionable Business Practice
|US oil and construction company Halliburton has put two of its businesses into voluntary bankruptcy as it prepares to settle asbestos claims.
The company, once headed by US Vice President Dick Cheney, has agreed to pay about $4bn (£2.3bn) to workers exposed to the killer mineral.
The procedure will allow the companies to continue trading as details of the payment are finalised by a US court.
The settlement ranks as one of the largest ever relating to asbestos.
According to spokeswoman Wendy Hall, the "reorganisation plan provides permanent and final resolution of Halliburton's asbestos issues".
None of the "companies are going out of business and this reorganisation will have no impact on any of our present or future projects", she said.
The cost of the settlement, however, will hit fourth-quarter earnings with a $1bn pre-tax charge.
The businesses placed into Chapter 11receivership are DII Industries (DII) and Kellogg Brown & Root (KBR).
The bankruptcy proceedings will not effect KBR's government services division, which is currently accused of overcharging the US military for some of its services.
The US's Chapter 11 bankruptcy process provides companies with court protection for a determined period of time while they discuss payments to debtors and reorgainse their businesses.
Halliburton has agreed to settle more than 386,000 claims from workers who alleged they were exposed to asbestos while working for DII and KBR.
There also were separate law suits from people who had inhaled another compound called silica.
Almost all of the claimants voted to accept Halliburton's offer of $2.8bn in cash, with the rest made up of company shares.
Under the deal, which was agreed almost a year ago, Halliburton will set up a trust to settle possible future asbestos lawsuits.
Most of the claims date back to the 1960s and 1970s, when asbestos was widely used as an insulating material.
It was later found out that asbestos can cause cancer and other respiratory diseases if inhaled.
Halliburton inherited many of the claims when it bought DII four years ago.
After the payment, which still needs the approval of the bankruptcy court in Pittsburgh, the company will be exempt from fresh claims.
That, analysts say, will remove a great deal of uncertainty surrounding the company and allow it to better plan for the future.
It is not just Halliburton that has been hit by asbestos and silica-related claims.
Earlier this year, asbestos companies and insurers have agreed to divide the cost of a $114bn fund to compensate victims.
European companies also have taken steps.
Swiss-Swedish engineering giant ABB set aside $1.3bn early this year to cover compensation, a move which protects it from future litigation.