Honeywell offloads asbestos liabilities to lift cash flow

(Reuters) -Honeywell said on Wednesday that it has divested all of its Bendix asbestos liabilities, as well as certain non-Bendix asbestos liabilities, to corporate liability acquisition platform Delticus.

The company is streamlining operations, with a plan to split into three independently listed companies expected to be completed by next year.

Honeywell inherited asbestos liabilities and lawsuits through its acquisitions of North American Refractories Company (NARCO) and Bendix Friction Materials.

The claims and lawsuits were over asbestos-related illnesses from NARCO and Bendix-made products.

Bendix, which made automotive brake linings containing asbestos, was previously owned by Honeywell and was sold in 2014.

While Honeywell set up the compensation trust with NARCO to resolve billions of dollars' worth of asbestos claims, it remained liable for many Bendix-related claims.

Honeywell and Delticus contributed about $1.68 billion in cash, as well as certain insurance assets related to these legacy asbestos liabilities, to the newly established structure, the former said on Wednesday.

To fund the transaction, Honeywell said it used a portion of the approximately $1.6 billion in cash received from sensing and controls products maker Resideo Technologies as part of monetary obligations under a 2018 indemnification agreement in connection with Resideo's spin-off from Honeywell.

The liability divestiture is estimated to be a one-time after-tax loss of approximately $115 million, and is expected to improve annual free cash flow by more than $100 million over the next few years as Delticus assumes full responsibility for administering and resolving all the asbestos-related claims.

(Reporting by Aatreyee Dasgupta in Bengaluru; Editing by Tasim Zahid)

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