Federal-Mogul recapitalization of France, Italy operations approved

By Caroline Salls

Pittsburgh, Oct. 17 - Federal-Mogul Corp. obtained court permission to recapitalize its foreign affiliates that make up the bulk of the company's operations in France and Italy, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The company said the recapitalization is the most effective way to improve the overall financial performance of its businesses and the value of Federal-Mogul's interest in those businesses.

The recapitalizations will have an economically neutral impact on Federal-Mogul's overall net worth, the company said in the motion.

Under the recapitalization, 84% of certain inter-company loans currently owed by Federal-Mogul France to Federal Mogul will be exchanged for a 100% equity share in Federal-Mogul France.

In addition, Federal-Mogul International's stock in the foreign entities will be cancelled.

The current equity interests of Federal-Mogul International and Federal-Mogul Ignition Co. will be exchanged for the proportionate indirect equity interests in the restructured and recapitalized Federal-Mogul Italy.

Some of all of the inter-company loans owed to Federal-Mogul Corp. by Federal-Mogul Ltd. will be contributed to a newly formed U.S. limited liability company in return for an indirect equity interest in the new company.

Federal-Mogul said in the motion that the recapitalizations do not involve the movement of any of the company's cash.

Federal-Mogul, a Southfield, Mich.-based auto parts manufacturer, filed for bankruptcy on Oct. 1, 2001. Its Chapter 11 case number is 01-10578.

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