North American Refractories Company Inc. (NARCO), a US member of the RHI group, filed for bankruptcy protection under Chapter 11 on 4 January 2002.
NARCO produces refractory materials in four plants located in the US, catering especially to the North American steel industry, and employs some 800 people. Didier-Werke AG acquired NARCO in 1986, making special contractual arrangements for the assumption of asbestos risks. In 1994, RHI acquired Didier-Werke AG and hence NARCO.
In view of the growing number of asbestos claims and the ever more incalculable amounts involved, the former NARCO owner disagreed on the interpretation of a prior contractual agreement allocating asbestos liabilities. NARCO negotiations regarding an extension failed on account of demands for annual USD amounts ranging in the two-digit millions. This situation combined with the issue of inadequate insurance coverage at NARCO and the ongoing financial crisis in the U.S. steel industry, however, may result in a financial burden that may exceed the company’s ability to pay.
In view of these facts, the NARCO management therefore elected to file for bankruptcy protection under Chapter 11. These proceedings will determine NARCO’s financial obligations, especially those resulting from the asbestos claims, and establish what assets are available to cover these obligations.
Following the instigation of Chapter 11 proceedings, NARCO will be deconsolidated retroactively from the RHI group as per 31 December 2001. Through the deconsolidation of assets and the provisional valuation adjustment of claims the RHI group has against NARCO, group results 2001 will be considerably compromised.
The impact this will have on group results is currently being determined in cooperation with the auditors.
RHI will be organizing a press conference related to this topic on 15 January 2002 to report on further details and the effects developments will have on RHI business in North America.