Mesothelioma Articles

T&N Fund Trustees Entitled to Block Deal

Posted: November 3, 2004

Source: by Tessa Thorniley, Business Telegraph (UK)

A high Court judge has ruled that Turner & Newall's pensions fund trustees will not breach their fiduciary duty to members by voting against a US-devised restructuring plan at the car parts maker.

Mr Justice Patten's decision strengthens the case of T&N administrators, UK asbestos claimants, and the trustees, in talks with US investors.

The trustees claim the rescue plan put forward for Federal-Mogul, T&N's parent company, in the US bankruptcy courts is structurally unfair.

They fear T&N's £1 billion, 40,000-member pension fund faces an £875m shortfall. Federal has been forced into Chapter 11 bankruptcy protection by asbestos-related lawsuits in the US.

In a statement, the trustees said they were "pleased" that the judge had said they were entitled to reject the financial restructuring and that such a move would not breach their fiduciary duty to pension scheme members.

A spokesman for the independent trustee, Alexander Forbes, said: "We informed Federal from the outset that the 'Let It Run' proposal for the pension scheme was not workable. The court has confirmed this. We continue to discuss and analyse an alternative proposal made by Federal and its creditors though there are significant concerns that this alternative may, likewise, turn out to be unworkable."

The initial Let It Run offer of a one-off $130m payment into the fund from the Federal creditors was rejected by the trustees as too low. The creditors are now offering $25m a year for the first three years, plus the promise of ensuring the scheme is fully funded within a decade.

Mr Justice Patten said: "It seems to me that the trustees would be open to attack, were they now to seek to implement Let it Run in the face of the actuarial and investment advice they have received."

The trustees said last night they would need assurances from the creditors that the T&N companies are strong enough to support the new pension scheme offer before they can approve the rescue deal. They have until November 17 to vote on the rescue.