Federal-Mogul Q&A on Bank Credit Agreement and Asbestos Findings FEDERAL-MOGUL LOGO Federal-Mogul Corporation Logo. (PRNewsFoto)[KI] SOUTHFIELD, MI USA 05/25/2000
4 January 2001
Federal-Mogul Q&A on Bank Credit Agreement and Asbestos Findings FEDERAL-MOGUL LOGO Federal-Mogul Corporation Logo. (PRNewsFoto)[KI] SOUTHFIELD, MI USA 05/25/2000
SOUTHFIELD, Mich., Jan. 4 As a follow-up to yesterday's
press release and webcast, Federal-Mogul Corporation clarifies
news reports with this Q&A attributable to G. Michael Lynch, executive vice
president and chief financial officer. Both the replay of the webcast and the
press release are available on the company's web site, http://www.federal-mogul.com .
(Photo: http://www.newscom.com/cgi-bin/prnh/20000525/DETH025LOGO )
Q: Did Federal-Mogul secure $550 million in additional credit to cover
asbestos claims?
A: No. The $550 million largely was secured to provide ample liquidity to
cover contingent financial scenarios for the next three years, the life of our
credit line. It should provide assurance to our customers, employees and
suppliers that we are in this for the long haul.
Q: Was the company at risk of bankruptcy had it not secured the
additional $550 million in credit?
A: No. The company needed to alter its financial covenants because of
our recent fall off in profitability. The amended agreement achieved that,
giving us the time we need to improve our operations, with the help of our six
global initiatives.
Q: Is it possible that Federal-Mogul may not use the $550 million of
additional credit?
A: Absolutely. We went after this as an extra cushion to provide for a
very rainy day and there is a good chance it will not be used in any material
way.
Q: Did you need the additional $550 million in order to recalibrate your
financial covenants on your pre-existing $1.7 billion credit line?
A: No. These are two completely separate issues. We were able to
recalibrate our covenants by providing collateral for the banks.
Additionally, we were able to get extra liquidity to cover us for a rainy day.
The extra liquidity is there for safety. We could have amended the covenants
without getting the extra $550 million credit line.
Q: Are you exiting the Center for Claims Resolution (CCR)?
A: We believe the CCR will be reconstituted to provide its members a
variety of elective services including claims processing services and thereby
provide its members more latitude in resolving their own claims. Based upon
this reconstituted service arrangement, we expect to continue to participate
with the CCR.
Q: Are you paying $550 million in asbestos payments in 2004?
A: No. Based on a change in our litigation management strategy, we have
estimated our asbestos claim payments to be $350 million in 2001, $250 million
in 2002, $150 million in 2003 and $150 million in 2004.
Q: Do you have insurance to cover asbestos payments?
A: We already are collecting insurance on part of our current payments.
In addition, we have an approximately $800 million asbestos-only policy that
would come into play if payments were to exceed the reserves presently on our
balance sheet.
Q: Does the additional credit aid Federal-Mogul with its asbestos issue?
A: No. It's there to provide assurance to our customers, employees and
suppliers that we have financial liquidity for the long haul. We are changing
our asbestos management strategy to focus payments only on the impaired and
malignant individuals who have been exposed to our subsidiaries' products. We
believe this will result in a long-term phase down of our asbestos payments.
We are also working toward a legislative solution for our continuing asbestos
situation.
Q: Did you get the new credit to stave off a cash shortage caused by
slowing auto sales and mounting asbestos litigation?
A: Based on what we've seen so far, our pre-existing credit line was
sufficient to fund the effects of slowing auto sales. However, the new credit
line gives us extra assurance.
Headquartered in Southfield, Michigan, Federal-Mogul is an automotive
parts manufacturer providing innovative solutions and systems to global
customers in the automotive, light trucks, heavy duty, farm and industrial
markets. The company was founded in 1899. For more information on Federal-
Mogul, visit the company's web site at http://www.federal-mogul.com .
Federal-Mogul's press releases are available by fax through Company News On-
Call, call 800-758-5804, ext. 306225.
Information in this press release contains forward-looking statements,
which are not historical facts and involve risk and uncertainties. Actual
results, events and performance could differ materially from those
contemplated by these forward-looking statements including, without
limitations, the cost and timing of implementing restructuring actions,
conditions in the automotive components industry, certain global and regional
economic conditions and other factors detailed from time to time in the
company's filings with the Securities and Exchange Commission. Federal-Mogul
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date of this press release.