Owens Corning unsecured creditors ask court to appoint trustee in bankruptcy case

By Carlise Newman

Chicago, Oct. 20 - Owens Corning's unsecured creditors committee filed a motion in court to appoint a Chapter 11 trustee in the company's proceedings in the United States Bankruptcy Court for the District of Delaware.

The committee said in a court filing that they seek to appoint the trustee "to remedy the debtor's continuing breach of its fiduciary duty of undivided loyalty to act in the best interest of all creditors and to pursue a fair, balanced, and confirmable plan of reorganization."

The creditors said they have lost faith in the plan process and the ability of Owens Corning to lead the way out of bankruptcy. They claimed that the officers and directors of the company decided their interests lay in "currying favor" with the asbestos plaintiffs' firms that would control the company's ability to use bankruptcy code section 524g and that would effectively own the company after reorganization, thus determining the future employment of its management.

"Three years into this bankruptcy, the record reflects the debtor's near-total abdication of its fiduciary duty of undivided loyalty, by reason of its abject failure even to grapple with the key issue in the case: setting a reasonable valuation for OC's disputed and unliquidated tort liability," said the creditors.

The creditors said the planning process is "phony and fundamentally flawed" because it contains no mechanism for determining the post-bankruptcy liquidation of Owens Corning's legitimate asbestos exposure; it is premised on participation in the case by thousands of claimants who have never filed a proof of claim; and it has no support from any significant non-asbestos party."

Owens Corning's willingness to "stand by and essentially hand over its keys to the plaintiff's firms" without challenging their underlying claims represents a fundamental abdication of the company's fiduciary duty of undivided loyalty to its commercial creditors, the committee said.

The appointment of a strong and independent trustee, who could leave existing middle and senior management in place to oversee the day to day operations, is the only hope for a resolution of this case, the committee said. The trustee would have the ability to bring about a settlement of the Chapter 11 case. If not, a trustee would be able to launch a more realistic and fair process in which Owens Corning would contest disputed claims and protect the best interests of its undisputed creditors.

Owens Corning, a buildings materials manufacturer based in Toledo, has operated under Chapter 11 bankruptcy protection since late 2000 following a slew of asbestos-related claims.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.