February 23, 2019

'Morally bankrupt': Asbestos victims slam James Hardie

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Under the scheme, scheduled to come into effect from July 1 next year, some proven claims will be paid to victims in instalments rather than as a lump sum, and some other liabilities will be deferred.

Asbestos Diseases Foundation of Australia president Barry Robson was outraged by the proposal which follows Hardie’s decision to pay hundreds of millions of dollars in dividends.

“Victims don’t die by instalments,” he said. “They need lump sum payments to pay medical bills and for carers, and to look after themselves and their families.”

The average mesothelioma victim dies within 155 days of diagnosis.

Mr Robson said it was immoral to cut payments when victims were already out of the workforce.

The AICF said it had approached the NSW Supreme Court regarding the proposed scheme. Approval from the Supreme Court and the NSW Attorney-General is required under the James Hardie Former Subsidiaries Act (2005).

James Hardie has paid $US556 million to its investors over the past two years and the building materials company is spending $US200 million ($221 million) a year over the next three years expanding plant capacity in its core US market.

“It shows you how morally bankrupt the Hardie’s board are when it comes to victims,” Mr Robson said.

“Why can’t they put some money into the fund? It was their product that did it. They manufactured those products knowing that it was dangerous”.

Independent senator Nick Xenophon said it was outrageous to “drip feed” victims and their families.

“It just adds insult to injury. Being paid on the drip is outrageous and adds uncertainty for victims who are dying from exposure to James Hardie’s products,” he said.

Mr Xenophon said he wrote to Prime Minister Tony Abbott and NSW Premier Mike Baird last week, urging them to investigate the funding gap.

“The response [to pay victims in instalments] is so outrageous that it deserves an extraordinary response,” Mr Xenophon said.

“The first step should be for the NSW and federal government to eyeball James Hardie executives and a legislative solution has to be on the table.”

James Hardie paid $120 million into the fund on July 1, which is all the fund had to pay claims as of July 3 after repaying $51.6 million in interest and principal from a previous drawdown on the loan facility.

The company has paid $721.4 million into the AICF since its inception in February 2007.

In the latest annual report, KPMG, the fund’s actuary, raised its base case estimate of claims liabilities by 12.6 per cent to $1.9 billion.

KPMG updates its forecasts based on the number, types and size of claims.

The AICF has paid almost $800 million and settled almost 4000 claims since its formation.

James Hardie said on Monday that any potential funding shortfall was “regrettable” and that it intended to stick to the present arrangement as specified in the 2006 amended final funding agreement.

The company said it was “available for discussions” with the AICF and government “specifically in relation to APS [approved payment scheme]”.

Discussions could take place as soon as this week. Mr Robson said he was trying to put together meetings with the office of Premier Mike Baird.

James Hardie has said it wants to increase its balance sheet gearing to about $US500 million. That figure implies the company wants to return about $US700 million in capital.

CIMB analyst Andrew Scott said that while the circumstances might may demand an APS-style solution, the prospect of delayed payments to claimants was unacceptable.

“We expect further negative publicity as a minimum and increased political pressure as highly likely,” he said. “Beyond that a final resolution is difficult to predict, but may make it more difficult for James Hardie to return excess funds to shareholders.”

Under the terms of the 2010 standby loan facility with the NSW government, the available drawdown is capped at the amount of the potential proceeds of insurance recoveries that may be available to the AICF.

KPMG estimates the present value of available drawings at $214 million. The fund expects to pay $500 million worth of claims over the next three years.

Based on current modelling, the fund said it would be able to pay claims as they fell due if ;the loan facility was increased to $320 million.

“They shouldn’t go to the public purse,” Mr Robson said.

“The loan arrangement is a backstop if the worst comes to worst, like if the US housing market hits rock bottom.

“The message [to James Hardie] is: put some money into the fund,” he said.

James Hardie saysthat the 35 per cent of operating cash flow it pays under the present arrangement is the maximum it can pay to grow and remain competitive.

Mr Robson and Mr Xenophon have said they want James Hardie to remain financially strong to ensure it can keep paying claims.


'Morally bankrupt': Asbestos victims slam James Hardie