SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
Date of Report (date of earliest event reported) October 8, 1998
RAYTECH CORPORATION
DELAWARE 1-9298 06-1182033
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File No.) Identification No.)
Incorporation)
Four Corporate Drive, Shelton, Connecticut 06484
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 203-925-8023
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Item 5. Other Events
Tentative Settlement of Raytech Corporation Bankruptcy
Raytech Corporation, the Registrant/Debtor ("Raytech")
has reached a tentative settlement (the "Settlement") with
representatives for its creditors and equityholders with
respect to a consensual plan of reorganization ("Plan") to be
filed in its Chapter 11 bankruptcy case which was commenced
in the United States Bankruptcy Court for the District of
Connecticut (the "Bankruptcy Court") in March 1989. The
Settlement is by and among Raytech, the Official Creditors'
Committee, the Guardian Ad Litem for Future Claimants, the
State of Connecticut, Department of Environmental
Protection, the United States Department of Justice,
Environmental and Natural Resources Division, and the
Official Equity Committee. Under the Settlement, the Plan,
which is subject to the vote of creditors and equityholders,
and confirmation by the Bankruptcy Court, will provide
general unsecured creditors, including the present and
future asbestos claimants and government claimants, through
the vehicle of a trust established pursuant to Section
524(g) of the Bankruptcy Code, with (i) ninety percent (90%)
of the stock of reorganized Raytech, (ii) all excess cash
not necessary to fund the ongoing operations of reorganized
Raytech, and (iii) net recoveries from certain claims
against third parties. Under the Plan, the existing Raytech
stockholders shall receive ten percent (10%) of the stock of
reorganized Raytech. It is estimated that the entire plan
confirmation process could take up to a year.
The dilution of shareholder value under the Settlement
reflects the fact that pursuant to court decisions discussed
below, Raytech's adjudged liabilities, as successor to
Raymark Industries, Inc. ("Raymark"), appear to substantially
exceed the reasonable value of its assets. The corporate
restructuring of Raytech approved by the shareholders in
1986 was ruled invalid by a U.S. District Court in Oregon
and Raytech was thereby held to have successor liability for
Raymark's asbestos tort liabilities. See Schmoll v. Acands,
Inc., 703 F. Supp. 868 (D. Ore. 1988), aff'd 977 F.2d 499
(9th Cir. 1992). Raytech then filed a voluntary petition in
bankruptcy to stay the multiple asbestos tort suits filed
against it on theories of successor liability. Thereafter,
Raytech sought determination in its bankruptcy case, that it
was not bound by the decision in Schmoll. The U.S. District
Court ruled that Raytech was bound under the principles of
collateral estoppel by the decision in Schmoll.
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Raytech Corporation v. White, No. B-89-623 (D. Conn., August
28, 1991) and that decision was affirmed by the Court of
Appeals, 54 F3d 187 (3d Cir. 1995), cert. denied, 516 U.S.
914, 116 S. Ct. 302 (1995).
Raytech then filed an adversary proceeding in the Bankruptcy
Court seeking a declaration that its liability as successor
to Raymark was limited. (See Adversary Proceeding No. 96-5181.)
The Court granted the creditors' motion for summary
judgment against Raytech ruling that under Schmoll and
White, Raytech's liability as Raymark's successor was
unlimited in scope (Bkrptcy. Conn Feb 11, 1998).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
RAYTECH CORPORATION
By: /s/LEGRANDE L. YOUNG
LeGrande L. Young
Vice President, Secretary
and General Counsel
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