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Bankruptcy Keyed to Bussel, 12th Ed.
In re Owens Corning
Citation:
419 F.3d 195 (2005)Facts
Owens Corning and its subsidiaries comprise a multinational corporate group with different entities serving different purposes, including limiting liability, gaining tax benefits, and addressing regulatory concerns. Each subsidiary maintained its status as a separate legal entity, observed governance formalities, and had specific reasons to exist separately. In 1997, Owens Corning sought a $2 billion loan to acquire Fibreboard Corporation. Due to its growing asbestos liability and poor credit rating, CSFB included subsidiary guarantees as a credit enhancement in its loan proposal. The Credit Agreement explicitly protected the separateness of OCD and its subsidiaries, requiring them to maintain themselves as separate entities with separate books and financial records. In 2000, facing mounting asbestos litigation, OCD and seventeen subsidiaries filed for Chapter 11 bankruptcy. The reorganization plan proposed substantive consolidation, which would eliminate the Banks’ guarantees while maintaining the separate corporate structures for other purposes. The District Court granted the consolidation motion, finding “substantial identity” between OCD and its subsidiaries and concluding that the Banks did not rely on the separate credit of the subsidiary guarantors.
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