CSR has delivered a feisty response to critics of its plan to split into two companies, saying the NSW government had proposed a commercially unacceptable asbestos guarantee, the corporate regulator had overstated the significance of uncertainties inherent in actuarial forecasts, and a fund set up by James Hardie had suggested a legal test which many large demergers approved in the past decade would have failed.
In a written submission released by the Federal Court yesterday, CSR's lawyers said debate over the impact on asbestos claimants should be postponed until after a shareholder vote, but in any case its scheme of arrangement was robust enough for the court to approve it.
Expert ''stress testing'' of worst-case forecasts of asbestos claims against a ''highly unlikely'' deterioration in business conditions provided ''a very high level of comfort that asbestos claims will be met'', the submission said.
Justice Margaret Stone is due to hand down her decision today on whether CSR can call a shareholder meeting to vote on the plan to spin off a new sugar company to be called Sucrogen. If the meeting proceeds, the demerger will later return to Justice Stone for approval.
The submission from Tom Bathurst, QC, said the government's proposal that Sucrogen be required to guarantee the asbestos liabilities of the building products company left behind would ''significantly alter the commercial characteristics of the proposed demerger''.
Under the government's plan, Sucrogen would be ''subject to a contingent liability over which it had no effective control, which had no correlation to its business revenue and which offered no commercial return or benefit'', Mr Bathurst wrote.
The Australian Securities and Investments Commission's concern about the limitations of actuarial projections ignored the conclusions of its own advice from the accounting firm Ernst & Young, he said.
He noted that Ernst & Young described the central estimate of asbestos claims produced by CSR's actuary, Taylor Fry, as ''reasonable'', and that it made no criticism of the stress test carried out by the investment bank Goldman Sachs JBWere and reviewed for CSR by the accounting firm PricewaterhouseCoopers. ''Provided the advice provided to the CSR board has been shown to be reasonable, the fact that the advice is subject to uncertainties does not warrant a conclusion that the advice should be rejected,'' Mr Bathurst said.
In answer to the Asbestos Injuries Compensation Fund, Mr Bathurst referred to court approval in the past decade of demergers.
If Justice Stone accepted the fund's argument that the demerger should be stopped because it would leave asbestos claimants worse off by reducing the assets available to them, no demerger involving a capital reduction would ever be allowed, Mr Bathurst said.
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