Babcock & Wilcox left asbestos-era Chapter 11 in 2006 and kept building power equipment

The Babcock & Wilcox Company, a maker of boilers and power-generation equipment with more than 138 years of history, filed for Chapter 11 in February 2000 after the potential cost of asbestos-related injury claims skyrocketed.

In January 2006 a bankruptcy judge approved McDermott International's reorganization plan and settlement; insurers agreed to pay $1.1 billion and McDermott $350 million into a trust fund handling B&W asbestos claims.

On February 22, 2006 — six years to the day after its filing — B&W exited Chapter 11, finalized its exit-financing package and funded its initial payment to the asbestos-claimants' trust. McDermott's CEO called it a transformational event, with B&W's results re-consolidated and its operations managed without Bankruptcy Court supervision.

The emergence came as US electricity demand was growing and new power plants were being planned, with B&W positioned to supply the boilers and environmental equipment the market needed.

B&W exited Chapter 11 in February 2006 with asbestos claims resolved through a funded trust, re-consolidating with McDermott as a going power-equipment business.

Chapter 11 converted an unmanageable mass-tort liability into a court-approved settlement and trust.

The trust funding — $1.1B from insurers and $350M from McDermott — gave claimants a defined path.

B&W's factories and customer relationships kept operating throughout the six-year case.

Exit financing and re-consolidation returned the business to normal management in February 2006.

For a manufacturer buried in mass tort claims, Chapter 11 can channel liability into a funded trust and keep factories running; the alternative was piecemeal litigation that could shut the firm.

B&W kept operating as a maker of boilers and power-generation equipment after emergence, re-consolidated with McDermott and managed without court supervision. The case is one of the landmark asbestos Chapter 11s: instead of liquidation, the company converted an unmanageable mass-tort liability into a funded trust and returned to normal operations with its manufacturing intact.