Summary
Howmet Aerospace Inc. (HWM) has filed an 8-K report disclosing a court ruling related to a legal proceeding initiated by Lehman Brothers International (Europe) (LBIE) against two of its subsidiaries, FR Acquisitions Corporation (Europe) Ltd and JFB Firth Rixson Inc. LBIE claims approximately $64 million plus interest is owed under interest rate swap transactions entered into in 2007 and 2008. The High Court of Justice in England and Wales ruled that the subsidiaries will be obligated to pay the amounts due upon LBIE's future emergence from administration, the timing of which is currently unknown. The Company has reserved $65 million and recognized a pre-tax charge for this amount in the third quarter of 2022, reflecting its current assessment of the potential obligation. Despite the ruling, Howmet Aerospace strongly disagrees with the judgment and any associated payment obligation. The Company intends to apply for permission to appeal the decision and will seek to stay any payment until the appeal process is concluded. A hearing for this application is expected by the end of 2022, with any potential appeal proceedings likely extending into 2023. Investors should monitor the progress of the appeal as it could impact the company's financial position.
Key Highlights
- 1Howmet Aerospace's subsidiaries are subject to a court ruling requiring payment of amounts due under interest rate swap agreements upon LBIE's emergence from administration.
- 2The claimant, LBIE, is seeking approximately $64 million plus interest.
- 3Howmet Aerospace has reserved $65 million and taken a $65 million pre-tax charge in Q3 2022 for this potential obligation.
- 4The company strongly disagrees with the ruling and intends to appeal the judgment.
- 5Howmet Aerospace will request a stay of payment until the appeal is concluded.
- 6A hearing for the appeal application is expected by the end of 2022, with appeal proceedings anticipated to continue into 2023.