Federal-Mogul To File Plan To Emerge From Chapter 11.

Federal-Mogul Corp. said that it plans to file a reorganization plan in early March to emerge from Chapter 11 bankruptcy protection. The announcement came on the heels of news that Federal-Mogul intends to acquire most of Honeywell's Bendix friction materials business in exchange for taking on all current and future Bendix liability in asbestos lawsuits (see separate article on page ).

Michigan-based Federal-Mogul, which makes engine bearings, pistons and other automotive components, filed for bankruptcy in 2001 because of asbestos litigation expenses and slumping sales. The reorganization plan will convert all claims from creditors and asbestos claimants into equity in the reorganized company, according to Federal-Mogul. Specifically, 49.9 percent of the new common stock will be distributed to noteholders, the company said. The rest will be distributed to a trust that will benefit current and future asbestos claimants.

Federal-Mogul chairman and chief executive Frank Macher said the plan "will eliminate over $2.5 billion of interest-bearing indebtedness, remove the taint of asbestos liabilities from the company and give customers, suppliers and other stakeholders the confidence they need in the long-term health and success of Federal-Mogul."

Completion of the Bendix acquisition is subject to regulatory approvals, and the deal will not be finalized until Federal-Mogul emerges from bankruptcy. As part of the Bendix deal, Federal-Mogul will assume all current and future asbestos liabilities for Bendix, which makes disc brake pads, drum brake linings and other brake products.