PwC Advisory Services Asbestos: A way forward from financial uncertainty 14 June 2005.
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Transcript of PwC Advisory Services Asbestos: A way forward from financial uncertainty 14 June 2005.
Advisory Services
Asbestos: A way forward from financial uncertainty14 June 2005
PricewaterhouseCoopers LLP
Who we are
Neil Gayner – Director• Neil has been involved with the insurance industry for many years as a management consultant and more recently specialising in restructuring using Schemes of Arrangement• He has specialised in dealing with latent claims issues.
Alan Augustin – Senior Manager• Alan has been involved in the insurance industry for over 15 years and is
experienced in the management and closure of long-tail liabilities • He is currently involved in developing solutions for corporates with asbestos
liabilities
PricewaterhouseCoopers LLP
Overview
• Successful companies in many industries are facing threats from asbestos liabilities arising out of historic activities
• Value and propensity of claims arising has increased over recent years. Forecasts indicate that they are unlikely to peak for at least 10 years
• Perception and performance of business can be materially affected by such legacy claims
• There may be a solution that benefits all stakeholders
PricewaterhouseCoopers LLP
Corporate
Potential impact of asbestos exposures
Disclosure/ accounts
Customer contracts
Negativeperception
Restrictions on dividends
Reputation
Trapped value
Boarddistraction
Lenders’attitude
Unpredictablecash flow
Complete uncertainty
Share price
PricewaterhouseCoopers LLP
Generic options available
Now
Do nothing
Seek insurance in respect of the
liabilities Restructurethe business
Sell the company
Implement a scheme of
arrangement
PricewaterhouseCoopers LLP
Scheme of arrangement
Binds actual and contingent claimants if approved
Court sanction required
Of those claimants who vote, requires for each class:
• Recognised and tested process
Companies Act 1985 (section 425) procedure
• Requires notification to potential claimants
• 50% by number• 75% by value
• Fair process
PricewaterhouseCoopers LLP
Basic structure of the scheme of arrangement solution
Existing company
Currentoperations
Asbestosliabilities
Initialassets
Scheme of arrangement Newco
Ongoing obligation to fund any shortfall in Newco (subject to an annual limit)
Transfer of payment obligation
Creation of fund
PricewaterhouseCoopers LLP
Benefits of scheme of arrangement
For the company:
• Certainty
• Protection from an increase or acceleration in asbestos liabilities
• Controls impact of future adverse cash flows
• Positive PR
• ‘Frees’ company from legacy issues from both a trading and investment perspective
For potential claimants:
• Establishment of a fund and company protection from insolvency means claims will be paid as they arise
PricewaterhouseCoopers LLP
Key messages
• Successful companies in many industries are facing threats from asbestos liabilities arising out of historic activities
• Value and propensity of claims arising has increased over recent years. Forecasts indicate that they are unlikely to peak for at least 10 years
• Perception and performance of business can be materially affected by such legacy claims
• Ring fencing asbestos liabilities using a Scheme of Arrangement may provide benefits to all stakeholders
PricewaterhouseCoopers LLP
This proposal is protected under the copyright laws of the United Kingdom and other countries. It contains information that is proprietary and confidential to PricewaterhouseCoopers LLP, and shall not be disclosed outside the recipient's company or duplicated, used or disclosed in whole or in part by the recipient for any purpose other than to evaluate this proposal. Any other use or disclosure in whole or in part of this information without the express written permission of PricewaterhouseCoopers LLP is prohibited.
© 2005 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.