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Halliburton and Equitas reach $575mn

Halliburton and Equitas said the settlement resolves all asbestos-related claims made against Lloyd's underwriters by Halliburton and its affiliates and subsidiaries, including DII Industries, Kellogg Brown & Root and others that have filed chapter 11 bankruptcy proceedings as part of a wider asbestos settlement at Halliburton.

Under the terms of the deal, which took three months to broker and is subject to judicial approval, Equitas will make two payments to Halliburton: a $500mn payment, followed by a further $75mn. The first payment will take place as DII and other Halliburton affiliates begin to pay claimants as part of the wider asbestos settlement, but no earlier than 5 January 2005. The second payment would follow 18 months later.

Halliburton said its claims against its London Market Company insurers were not affected by the settlement. The company had previously estimated that its total asbestos liabilities came to around $4bn, half of which it expected its insurers to cover.

"This settlement demonstrates the strength and scope of our insurance asset," said Dave Lesar, Halliburton chairman, president and CEO. "Even with this settlement we do not foresee a reduction in our insurance receivable. We are very pleased that this portion of our insurance asset has recognized the potential risk of our claims and moved in a responsible manner to resolve them. We hope other insurers will respond in a similar manner, so that those who will benefit from the Trust will be able to receive payment and move forward with their lives."

The settlement came just after the company reported a Q4 2003 loss on the back of its global asbestos settlement, which resulted in a Q4 2003 charge of $1.09bn, or $2.51 a share.

Nonetheless, revenue at the firm surged by 63 percent to $5.46bn from $3.35bn, largely as a result of contracts won by subsidiary Kellogg Brown & Root for reconstruction work in Iraq.

For Equitas, the deal means an end to its largest direct liability and also the settlement of five out of ten of its largest asbestos exposures.

Simon Wright, Equitas' head of asbestos pollution and health hazard claims, said: "The settlement with Halliburton caps what is, by far, the largest single direct liability faced by Equitas. This major settlement is yet another example of Equitas' commitment to resolving claims with all Lloyd's policyholders as expeditiously as is reasonably possible and at fair values. Both we and Halliburton will continue to review the underlying asbestos claims that will be paid on confirmation of the bankruptcy plan as part of Halliburton's global asbestos settlement."

Glenn Brace, Equitas' claims director, added: "We were able to settle [the claims] after tough negotiations in which both sides looked very carefully at their assets and liabilities before settlement was reached. We have had some of the most sophisticated businesses in the world on the other side of the negotiation table. We are willing to have similar discussions with any of our policyholders, large or small, so long as they are sincerely interested in reaching a realistic settlement."

As of December 2003 Equitas faced total estimated liabilities of £9.6bn, of which £5.3bn are related to asbestos. At the end of 2003 it was forced to boost its reserves against asbestos claims by £400mn, a sum in addition to the £3.8bn added to its reserves over the previous four years.

The Halliburton deal comes on top of Equitas' $472mn settlement with Honeywell in April 2003.

Moody's Investors Service affirmed Halliburton's senior unsecured debt ratings at "Baa2" - the second lowest investment grade rating - on news of the settlement. But it said the longer-term outlook for the company remained positive.

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