Manville Corp. yesterday agreed to pay as much as $520 million over seven years to the beleaguered Manville trust that was formed to settle the claims of tens of thousands of victims of asbestos-related diseases but that is now nearly out of money.
The trust said earlier this year that it was virtually broke and could not pay more than 130,000 asbestos victims or their survivors who are awaiting compensation.
The agreement between the Denver-based company, once the largest maker of asbestos products in the country, and the Washington-based trust is the first step in a two-part negotiation to restructure the fund.
The pact still must be approved by U.S. District Court Judge Jack B. Weinstein, who is hearing the personal-injury cases against Manville.
The cash will not be available until a year from now at the earliest, according to the agreement, and that date could be pushed back by years if there are court challenges to the pact, sources said.
Representatives of some asbestos victims said yesterday that the money is too little and will come too late for many who are dying from such diseases as asbestosis and lung cancer.
"It should be sooner ... and no, it's not enough," said one attorney close to the process. "You could give them every dollar of the company and it wouldn't be enough. There are too many claims."
Weinstein in July called the severe cash crunch in the fund a "judicial emergency" and ordered all the assets of the trust frozen while a court-appointed adviser worked with the company and the trust to find more funds.
A combination of the initial claims and huge legal costs had exhausted the fund, leaving thousands of victims with no hope of payment until well into the next decade.
Weinstein declined to comment yesterday. However, Leon Silverman, the court-appointed adviser, said in a statement that the court "has expressed its satisfaction at the results thus far."
Silverman will continue to work with the company and the trust to resolve the heated issue of which claimants will get paid first, how much they will get and when.
A number of plaintiffs' advocates have complained that the trust ran out of money in the first place because it paid too much for initial claims and paid on a first-come, first-served basis.
Many now favor a system that would pay the sickest victims first and make payments over several years rather than in one lump sum.
Several attorneys said that while $520 million may sound like a lot of money, it is paltry compared with the need and the number of cases that can be settled.
"It's not going to be of enormous help," said Mary Masulla, counsel to the Sheet Metal Occupational Health Institute, which has referred nearly 3,000 cases involving Manville to attorneys.
Over the first two years, the money would allow the trust to settle about 5,000 claims, assuming the average payout stays at about $40,000.
Others called the agreement a constructive move, pointing out that some money was better than none and that the company's financial health has to be preserved.
"The viability of the Manville Corp. is all the victims have," said Richard F. Scruggs, who represents 4,200 shipyard workers along the Gulf Coast. "If they're too strapped, there won't be anything for anyone. We're going to have to live with a schedule that lasts into the next century."
The Manville Personal Injury Settlement Trust was set up in 1987 as a $3 billion fund -- much of it in stocks and bonds of Manville Corp. -- after the company filed for protection from its creditors in bankruptcy court because it was inundated with personal-injury lawsuits.
As of June 30, the trust reportedthat it had only $156 million in cash. At the time, it had settled cases representing $365.7 million in claims that remain unpaid. Under Weinstein's order, the trust continues to settle claims, but it cannot pay them.
Under the agreement announced yesterday, Manville Corp. would pay a special dividend to all common shareholders over the next seven years. Manville would turn the trust's convertible stock into common stock, giving the trust about 80 percent of the company's 120 million outstanding common shares, compared with about 50 percent today.
The Manville trust would receive $100 million in each of the first two years and $40 million in the third and fourth years in the form of the special dividend payments. In the fourth through seventh years, the trust would be paid as much as $300 million, depending on the company's performance.
After the first year, the payments are subject to the company's ability to arrange financing if it cannot pay them out of its own income. A Manville Corp. spokesman said the company assumes financing will be available, but added, "I don't think anyone can predict future financial markets."