The Diacetyl claims were potentially one of the largest unknown outstanding liabilities. They just settled 90% of them for $50 million less an undisclosed portion of which will be paid by insurance. That outcome seems positive to me. The stated amount of Diacetyl claims had been $60 million but the vast majority of the claims were "unliquidated" so the total potential liability was very large and unknown. The total liability is now more reasonably estimable and almost certainly has to be on the lower end of where the debtors estimated the Diacetyl claims to end up.
Just as a reminder, here are a few Diacetyl related comments from the Knight Capital report issued in January 2010 that will speak to the level of risk that Knight thought was inherent in Chemtura because of the Diacetyl claimants:
"Given where comps trade, Chemtura Corp. is arguably worth $2 billion+, which should cover the Company’s existing liabilities, including a large diacetyl claim."
"Risks to the equity valuation include dilution by diacetyl litigation claims, as well as by substantial noteholder equitization."
"Company may assign a material claim to diacetyl litigants of $500 million+ in order to insure that equity holders are out of the money. Since annual payouts to these litigants have been controlled and manageable, we believe 2026 noteholders would push to stay in bankruptcy and adjudicate the claims individually rather than agree to such an award."
Also of note is that a number of the bond valuations and the equity valuation scenarios contemplated in their write-up were based on a total Diacetyl liability within the $250 to $350 million context.
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