Due Diligence and Liability Assessment for Bankruptcy of a Global Automotive Parts Firm.
Background. As part of a multi-discipline due diligence team, DCA conducted environmental and insurance due diligence on a global supplier of automotive parts (the "company") that had filed for bankruptcy because of asbestos liabilities. Due diligence was conducted as part of the bankruptcy reorganization process to define, quantify and manage the asbestos and environmental liabilities, and the insurance assets that would be used to partially fund a series of trust funds established to provide monies for future asbestos claimants.
Risk Exposure. The company faced significant risk from environmental liabilities that could not be discharged through the bankruptcy process since the re-organized company would retain and would have to manage these liabilities. The liabilities originated from environmental contamination at currently owned sites, formerly owned sites, and third-party waste disposal sites located throughout the U.S. and abroad.
The insurance assets of the company were at significant risk due to multiple law suits and settlement negotiations among the insurers and the company over coverage obligations, and among the company and predecessor/successor entities over shared coverage. There was also an additional risk to the insurance assets from potential future environmental claims filed by the company against insurance policies exhausted based on combined single limits (i.e., property damage and personal injury limits). Any loss of the insurance assets for any of these reasons would adversely impact the funding of the asbestos trust funds.
Resolution. The environmental due diligence identified contingent liabilities and evaluated claims, brought against the company and its multiple subsidiaries before and during bankruptcy proceedings, from federal and state environmental agencies seeking cost recovery and from private parties asserting cost contribution claims. Settlement agreements entered into by the company and various plaintiff parties during bankruptcy proceedings were reviewed.
The insurance due diligence defined and quantified the available insurance assets, monitored the progress and outcome of the various lawsuits and settlement negotiations over insurance coverage, and assessed the insurance assets that would be available to fund the asbestos trust funds under different recovery scenarios.
Results. A plan of reorganization was ultimately approved by the court and trust funds were established. Monitoring of the environmental liabilities and the insurance assets is ongoing.
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Valuation of Environmental Liabilities for Bankruptcy of a Global Supplier of Specialty Chemicals.
Background. As a subcontracted expert to a larger consulting firm, DCA prepared valuations of environmental liabilities for a global supplier of specialty chemicals (the "company") that filed for bankruptcy under Chapter 11. The company was seeking to discharge certain environmental liabilities through negotiations with state and federal regulatory agencies and third-party groups during the bankruptcy process. The liabilities originated from known or suspected environmental contamination at over 30 formerly owned or leased sites and third-party waste disposal sites located throughout the U.S.
Risk Exposure. The company faced significant risk from these environmental liabilities since the re-organized entity would retain and would have to manage these liabilities if they could not be discharged during the bankruptcy process.
Resolution. DCA was responsible for developing the conceptual framework of the valuations in accordance with ASTM E 2137-06 (Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters), and the format and general content of the work product deliverables produced by the consulting firm for its client; providing guidance and oversight to a team of environmental professionals preparing the valuations; and serving as the team expert during communications with the company and its bankruptcy counsel on matters related to the valuation of environmental liabilities in bankruptcy proceedings and the technical execution of the work scope.
Results. Individual detailed reports of the valuations were prepared for all of the sites within a 10-week period to accommodate the company's aggressive schedule for negotiating the settlement of these liabilities with state and federal regulatory agencies and other third-parties.
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