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Bankruptcy Judge Approves Oakfabco's Amended Plan And Asbestos Trust

Mealey's(R) Asbestos Bankruptcy Report


Online ISSN: 2159-158X, Print ISSN: 1537-2065
June 2019

Copyright 2019 LexisNexis, a division of RELX Inc.


Copyright in individual articles as noted therein.

Cite: 18-11 Mealey's Asb. Bankr. Rep. 9 (2019)

Section: Volume 18, Issue #11

Length: 817 words

Dateline: CHICAGO

Body

An Illinois federal bankruptcy judge confirmed the Chapter 11 liquidation plan and its asbestos trust for
boiler company Oakfabco Inc. on April 11, less than a year after the judge halted payments to attorneys
working on the case due to a lack of progress (In re: Oakfabco, Inc., No. 15-27062, N.D. Ill. Bkcy.).

(Order available 48-190628-005R )

2015 Settlement

Oakfabco filed a bankruptcy petition in 2015 in the U.S. Bankruptcy Court for the Northern District of
Illinois, seeking to liquidate its assets, establish a multimillion-dollar trust with insurance settlement
proceeds to pay asbestos personal injury claims and then cancel its corporate existence. At the time
Oakfabco filed the petition, there were approximately 3,400 active asbestos claims pending against the
company.

On Sept. 11, 2015, Oakfabco filed motions seeking approval of three settlements entered into with
insurers before the company filed for bankruptcy protection. One of the settlements was with Columbia
Casualty Co., American Casualty Company of Reading, Pennsylvania, and The Continental Insurance Co.
(collectively, CNA). Under the settlement, CNA agreed to pay $9,783,079 in exchange for releases of
CNA's coverage obligations under certain policies CNA acknowledged to exist, as well as under polices
that Oakfabco said were missing.

However, the Asbestos Claimants' Committee objected to the settlement, and Oakfabco then withdrew its
motion to approve the settlement and later moved to reject the settlement agreement, which the
Bankruptcy Court approved.
Bankruptcy Judge Approves Oakfabco's Amended Plan And Asbestos Trust

Meanwhile, Oakfabco filed its plan of liquidation and disclosure statement on Dec. 5, 2017, but withdrew
it and filed an amended plan. The plan proposed a liquidating trust to assume responsibility for the
asbestos personal injury claims against the debtor.

'Meaningful Resolution'

On May 17, 2018 Bankruptcy Judge Jack B. Schmetterer declined to approve routine interim applications
for compensation filed by Oakfabco's attorneys at Reed Smith and counsel for the Asbestos Claimants'
Committee at FrankGecker due to lack of progress in the case. Then, on July 9, the bankruptcy judge
dismissed a motion by Oakfabco to approve its disclosure statement. Oakfabco responded by withdrawing
all of its liquidation plans and disclosure statements from consideration.

In response, Bankruptcy Judge Schmetterer on July 23 canceled all scheduled hearings on the withdrawn
plan materials and halted all automatic payments from the debtor's estate to the attorneys in the case,
saying he "is no longer confident that the Debtor and creditor professionals are working towards a
meaningful resolution in this case."

After mediation, Oakfabco moved Nov. 27 to approve a settlement under which CNA will pay $2,625,000
more than the 2015 settlement amount, for a total settlement sum of $12,408,079. According to the
motion, CNA has already paid $900,000 to the debtor's estate, leaving $11,508,079 payable within 30
days of court approval.

On Dec. 18, Bankruptcy Judge Schmetterer approved the settlement. On the same day, he signed four
orders approving compensation requests for Oakfabco's and the Official Committee's attorneys after
holding a hearing sua sponte on the requests.

Confirmation Hearing

Oakfabco filed an amended disclosure statement Jan. 14 that includes information about the CNA
settlement. Bankruptcy Judge Schmetterer then approved the statement in a prepared order, finding that
the statement provides creditors with "adequate information" as required under Section 1125(a) of the
U.S. Bankruptcy Code, 11 U.S.C. § 1125(a).

The bankruptcy judge held a confirmation hearing March 28. In his prepared confirmation order,
Bankruptcy Judge Schmetterer said that all objections to the plan were either withdrawn, resolved or
overruled "for reasons stated on the record at the Confirmation Hearing."

The bankruptcy judge held that the plan is feasible and meets all of the U.S. Bankruptcy Code
requirements for confirmation, including that the plan was proposed in good faith.

The plan established a qualified settlement fund to evaluate and pay asbestos personal injury and wrongful
death claims using insurance settlement funds. The total amount of trust funding was not disclosed.

Counsel

Oakfabco is represented by Stephen T. Bobo of Reed Smith in Chicago and Paul M. Singer and Andrew J.
Muha of Reed Smith in Pittsburgh.

The Asbestos Claimants' Committee is represented by Frances Gecker, Joseph D. Frank and Micah R.
Krohn of FrankGecker in Chicago.

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Bankruptcy Judge Approves Oakfabco's Amended Plan And Asbestos Trust

(Additional documents available: Amended liquidation plan 48-190628-006X

Amended disclosure statement 48-190628-007X )

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Load Date: June 28, 2019

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