Halliburton Units File for Bankruptcy
By Sheila McNulty in Houston
Dec 17, 2003
Halliburton said in Tuesday several of its subsidiaries, including Kellogg Brown & Root, which holds the controversial US government contract in Iraq, had filed for bankruptcy protection from creditors to provide for a permanent resolution to the company's asbestos liabilities.
The filings, in Pennsylvania bankruptcy court, followed Friday's announcement that a majority of the more than 386,000 asbestos claimants had voted to accept Halliburton's reorganisation plan as part of a $4bn settlement. They agreed to limit to $2.8bn the cash required to settle the claims, so the subsidiaries were required today to pay $326m of that amount prior to the bankruptcy filing.
The affected subsidiaries are to continue to be wholly owned by Halliburton, one of the world's biggest providers of products and services for the petroleum and energy industries, and continue normal operations. KBR's government services business is excluded from the filing.
Analysts say Halliburton's asbestos liabilities, not the charges of US favouritism for Iraqi contracts and overcharging for services there, have been a drag on the company's share performance. Yet an expectation that it was due to be resolved by the year-end has already pushed up Halliburton's share price, so analysts were neutral on the news.
Halliburton's shares were up only 1.95 per cent to $25.14 on the announcement. Standard & Poor's affirmed its BBB corporate credit rating on Halliburton and revised its CreditWatch implications, to "developing" from "negative".
Grant Borbridge, senior analyst at Prudential Financial, said it would be at least another four to six months before the filing could be beyond appeal, which could then allow for the funding of the settlement trust, implementation of the remaining settlement terms and the discharge from bankruptcy of the subsidiaries by the second or third quarter of next year. Nonetheless, he considered the settlement "the last significant hurdle before the company can finally rid itself of its asbestos liability".
Halliburton inherited the asbestos liability in 1998, when it acquired Dresser Industries, which had used asbestos in bricks and the coating for pipes.
"We have reached a major milestone in our effort to settle our asbestos issues," said Wendy Hall, Halliburton spokeswoman. "It is important to note that none of KBR and the Halliburton companies are going out of business, and that this re-organisation will have no impact on any of our present or future projects."
*** POSTED DECEMBER 17, 2003 ***