Floor covering maker Congoleum Corp. is facing a contest for control of the outcome of its bankruptcy case with insurers and bondholders who have filed a rival Chapter 11 plan.
Continental Casualty Co., Continental Insurance Co. and the official committee of bondholders in Congoleum’s bankruptcy outlined their Chapter 11 plan in papers filed Friday in a New Jersey bankruptcy court.
Mercerville, N.J.-based Congoleum filed its own version of a Chapter 11 plan Aug. 15, and said that the company and its asbestos creditors were aligned in support of the plan.
A bankruptcy judge in the U.S. Bankruptcy Court for the District of New Jersey will review the competing Chapter 11 proposals at a Sept. 21 hearing in the case, which began in December 2003.
Congoleum has reached settlements with some insurance companies over coverage that it proposes to contribute to a trust to cover the asbestos liabilities that threatened to swamp it.
Like many other companies, Congoleum is trying to use bankruptcy laws to shield its assets by directing asbestos claims into a trust to be set up under a Chapter 11 plan.
Such trusts are typically funded with cash, debt, insurance and stock in the reorganized company, or some combination of assets.
At the time of the bankruptcy filing, Congoleum estimated that about $900 million in insurance coverage was available to it.
The company has had to go to court to collect from other insurers, and that litigation continues.
Insurers claim improper dealings taint a settlement that was supposed to clear up about $494 million worth of asbestos claims.
The Chapter 11 plan that Continental Casualty, Continental Insurance and the bondholders propose would fund an asbestos trust with 800,000 shares of new common stock in a reorganized Congoleum, and proceeds of the asbestos insurance litigation, if there is any.
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