The material CSR proposed to circulate about its $2.6 billion demerger did not allow adequate analysis of the impact on asbestos compensation, ASIC told the Federal Court yesterday.
The material CSR proposed to circulate about its $2.6 billion demerger did not allow adequate analysis of the impact on asbestos compensation, the corporate regulator told the Federal Court yesterday.
In its successful move to delay the court's approval for CSR to send the material to its shareholders, the Australian Securities and Investments Commission said it needed time to brief its actuary.
Referring to draft copies of the explanatory statement and independent expert's report, ASIC's barrister ,Robert Beech-Jones, said: "On any view of what's in there, they don't give any figures or quantitative analysis or any discussion about how one assessed the provisions for asbestos liabilities, or how one can be satisfied to any level of confidence about the adequacy of that provision."
There was standing room only for the 40 lawyers and executives at the late afternoon hearing in Sydney.
The first court hearing for a scheme of arrangement typically only involves the company proposing to restructure seeking approval to send explanatory material to shareholders. A second court hearing is required after shareholders have voted.
In this case Justice Margaret Stone will hear from CSR, ASIC, the NSW Government, the Asbestos Injuries Compensation Fund (AICF) set up by James Hardie in 2007 and James Hardie itself, which provides funding to the fund.
The AICF and James Hardie are concerned any default by CSR could fall to them.
Justice Stone yesterday adjourned the first hearing to January 15.
CSR said that date could still allow the demerger into sugar and building products businesses, announced in June, to proceed as planned by March 31. But its barrister, Tom Bathurst, QC, warned that any further delays could cause "considerable disruption".
"This may prejudice investors of CSR who have purchased securities in anticipation of the benefits that may arise from the demerger," Mr Bathurst said.
If the restructure was not completed by March 31, CSR would be forced to produce annual accounts for the existing group, a new scheme booklet and a new independent expert report, he said.
Shares in CSR have rallied on the back of the demerger proposal, rising more than 30 per cent to a high of $2.08 in August. Many analysts and fund managers at the time applauded the decision to split up CSR and allowing the various business units to unshackle themselves from the weighty conglomerate model.
However, some questioned the gearing levels the new companies would start their public life with and the future of the asbestos liabilities.
It is expected the asbestos liability claims currently held by CSR would be lumped with the building products division, along with CSR's 36.05 per cent interest in the Tomago Aluminium smelter joint venture.
The demerged sugar and renewable energy business, to be called Sucrogen, would be listed in its own right. Both would take a portion of CSR's estimated $1.2 billion in debt. CSR's liability stems from its mining and distribution of asbestos more than three decades ago.
Recent documentation released by CSR for its $375 million capital raising stated that as at September 30, 2009 CSR had made a provision of $446 million for all known asbestos-related claims and future possible claims.
It warns that as CSR cannot predict the final cost of all future asbestos-related claims, the provision could underestimate the total cost of the exposure.
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