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Dow Corning Corp. emerged Tuesday from a nine-year bankruptcy with a plan to pay $2.35 billion to women who sued the company for manufacturing silicone breast implants that allegedly caused them to suffer various illnesses. Opening the way for the exit was when a group of Nevada women who had continued their litigation against Dow Corning decided earlier this spring to drop their lawsuit. In addition, Judge Denise Page Hood of the U.S. Bankruptcy Court for the Eastern District of Michigan in Bay City in May approved a last-ditch plan amendment allowing a $1.5 billion cash payout to unsecured creditors, making them whole, according to Dow Corning’s litigation counsel, David Bernick of Kirkland & Ellis. “The entire payout on the tort litigation is capped at $2.35 billion and includes a $400 million litigation facility to pay those who opt out of the settlement facility,” Bernick said. “Those who choose can decide to continue their litigation over the next six months while the others who settle will get paid by early July.” The $1.5 billion payout will be for trade vendors and noteholders, according to debtor counsel, George Tarpley of Neligan Tarpley Andrews & Foley. Dow Corning had initially planned to pay those unsecured claims by issuing new notes but decided on cash payments since it has been cash-positive since it filed for Chapter 11 on May 15, 1995, Tarpley said. “Dow Corning was a solvent company during the entire length of the filing and decided to pay in cash because it wanted the flexibility to use its own financing rather than issue senior notes,” Tarpley said. “The only reason the company went into Chapter 11 was due to all its silicone-related lawsuits.” Roughly 245,000 women with silicone implants filed claims against Dow Corning. Women with the implants had alleged that leaking gel had caused illnesses such as lupus, rheumatoid arthritis, hardening of the breasts, memory loss and fatigue. The Institute of Medicine said in 1999 that there was no evidence that implants cause major illnesses but warned that pain and other complications often occurred after the surgery. Dow Corning, which Dow Chemical Co. and Corning Inc. own equally, had been litigating the silicone-related suits before the Federal Drug Administration asked for a voluntary moratorium on the suits in January 1992, Bernick said. “That prompted thousands more lawsuits and the company eventually filed [for Chapter 11 protection] to get out from all the litigation,” Bernick said. “Dow Chemical always took the position that there was no scientific evidence to support the legal claims against them and scientific evidence now supports that claim.” The company has no secured debt, and didn’t need a debtor-in-possession financing or an exit loan. Judge Arthur Spector of the Bay City, Mich., court in 1999 confirmed Dow Corning’s joint reorganization plan, but that approval triggered a series of appeals, including the one by the Nevada group, Tarpley said. (Spector’s tenure on the bankruptcy bench then expired and the case was transferred to Hood in early 2001, he said.) “A key blocking point was the appeals by a handful of Nevadan women and some in Korea that held up the plan for two to three years,” Bernick said. Bernick and John Donley are litigation counsel at Kirkland & Ellis. Tarpley and David Ellerbe are debtor counsel at Neligan Tarpley. Michael Flynn of Davis Polk & Wardwell represents the creditors. Copyright �2004 TDD, LLC. All rights reserved.

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