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URGENT Dalkon Shield Maker Files Reorganization Plan

April 16, 1987

RICHMOND, Va. (AP) _ A.H. Robins Co., operating under bankruptcy-court protection because of pending health claims against its Dalkon Shield birth control device, unveiled a reorganization plan Thursday that includes a $1.75 billion trust fund to settle the claims.

″We think that it is a fair plan, a plan that will bring certainty of payment,″ Robins attorney James C. Roberts told the two federal judges overseeing the pharmaceutical company’s reorganization in U.S. Bankruptcy Court here.

But Murray Drabkin, the chief lawyer for women seeking compensation for alleged Dalkon Shield injuries, said the plan ″is going to have a hard struggle getting confirmed″ by Robins’ creditors.

Robins filed under Chapter 11 of the U.S. Bankruptcy Code on Aug. 21, 1985. Although solvent, Robins took the step to settle the flood of litigation relating to the alleged health problems caused by the Dalkon Shield.

At the time, about 5,100 claims were pending against the company, which pulled the device from the market in 1974.

Under Chapter 11, a company continues operating but its protected against creditors’ lawsuits while it works out a reorganization plan.

The proposal announced Thursday calls for the creation of a trust fund that would resolve and pay for Dalkon Shield claims.

Robins would provide the fund with an initial $75 million cash infusion, and another $1.675 billion would be made available to the fund through a line of credit issued by a group of banks led by Manufacturers Hanover Trust Co. in New York.

Robins said it also would be required to provide $840 million to Manufacturers Hanover to partially secure the line of credit.

In all, Robins said it would need $1.1 billion in cash to emerge from bankruptcy court. The company said it expected to provide about $300 million of the total from internally generated funds, and the rest would be borrowed.

″The plan filed today will provide for full and fair payment to Dalkon Shield claimants as well as payment in full to general and unsecured creditors,″ E. Claiborne Robins Jr., president and chief executive, said in a statement.

But Drabkin questioned the reliability of the banks’ commitment, and said the plan overall ″isn’t certain.″

″This is not cash,″ Drabkin said. ″This is a promise.″

U.S. District Judge Robert R. Merhige Jr., who is hearing the case with U.S. Bankruptcy Judge Blackwell N. Shelley, said the proposal represented a step in the eventual settlement of the Robins case.

″We’ve still got a way to go, but we’re moving,″ Merhige said.

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