Owens Corning should get examiner, U.S. trustee says

By Jeff Pines

Washington, June 8 - Whether there was anything improper in how Owens Corning Corp. developed its reorganization plan should be investigated by an examiner, the U.S. trustee said in a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

A motion to appoint an examiner has already been put forward by Credit Suisse First Boston and others holding pre-Chapter 11 bank debt. They contend that the judge and his advisors favored the asbestos claimants' attorneys and the company developed a plan reflecting that bias.

The acting trustee, Roberta Angelis, based her opinion on the size of Owens Corning's debt. No one involved disputes that the Toledo, Ohio-based building products company's debts meet that threshold, she said.

"Based upon the record before the Third Circuit, there is at least the appearance that those who were appointed as neutral 'mediators' or impartial 'advisors' had conflicting interests, and there is at least the appearance that those conflicts, together with the ex parte meetings between various parties and the court, may have affected the plan process in this case," she said.

Judge Alfred Wolin was removed from the case because there was the appearance of impropriety.

"Further inquiry may be needed to determine the extent of actual conflicts and irregularities," the trustee said.

Among the issues the trustee wants the examiner to investigate are the basis for the $16 billion valuation of Owens Corning's asbestos liability; the conduct of the asbestos claimants' lawyers; and whether conduct has occurred that should be referred to the U.S. attorney's office for investigation.

The trustee, however, believes CSFB and others are asking for the examiner to be given too broad a scope for investigation.

Company, asbestos attorneys oppose examiner

In separate filings, Owens Corning objects to the appointment of an examiner as do attorneys representing the asbestos claimants.

The company said the plan is the product of two years of negotiations in which all of the creditors took part. But after the pre-petition bank debt holders saw they would not get a 100% recovery they did everything they could to impede the reorganization plan, it claimed.

"The bank debt holders' self-interested campaign to derail, or at least delay, the plan has reached a new level of urgency now that it is clear that they are the only constituency in this case that has not agreed to terms of a consensual plan of reorganization," Owens Corning said. Monday afternoon the company reported reaching an agreement with its bondholders, holders of senior trade claims and asbestos litigants.

Owens Corning noted that the Third Circuit in its decision to remove judge Wolin said that he did not show "the slightest hint of any actual bias."

In a separate Monday filing with the court, James McMonagle, representing the future asbestos claimants, agreed with the company that no examiner was needed.

In fact, McMonagle argued that the $5 billion threshold to appoint an examiner does not apply in Owens Corning's case because an examiner was previously appointed and the bankruptcy code does not call for multiple examiners.

The official committee of asbestos claimants also objected to appointing an examiner and echoed the company's sentiments.

The committee sees CSFB's move as an attempt to have the examiner investigate anything the bank debt holders do not approve of. Instead, CFSB should wait for the confirmation hearing and address its concerns there, the committee said.

Owens Corning filed for bankruptcy on Oct. 5, 2000 to obtain relief from asbestos-related lawsuits. The company's Chapter 11 case number is 00-03837.

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