Owens Corning bondholders and asbestos claimants have filed for a rehearing of the Third Circuit Court of Appeal case that overturned a district court decision to remove the structural seniority position of bank lenders owning debt in the name.
The bondholders filed for a rehearing in the Third Circuit. One lawyer said the chance that a rehearing will be granted is "zero." He said the Third Circuit's decision to overturn Judge John Fullam's decision to remove the structural seniority position of bank lenders was well reasoned, and for this reason the case is unlikely to be reheard. "It was written by a judge who is used to bankruptcy cases," said the lawyer.
The Third Circuit's ruling reversed a decision made by a district court last October allowing Owens Corning, a maker of building parts, to consolidate its subsidiaries into one as part of its reorganization plan. This process is known as substantive consolidation. Bank lenders opposed the decision because they had obtained guarantees on some of the firm's subsidiaries. The ruling stopped the lenders from claiming assets of the subsidiaries that had not filed for bankruptcy. Those that fought against the ruling said it would have hampered lenders' ability to rely on corporate guarantees.
Owens Corning and lawyers representing the bondholders did not return calls.