Industrial engineer ABB looks set to be close to resolving its multi-million pound wrangle over asbestos claims.

The company - which has a number of subsidiaries in the Midlands - said it has received approval from a US bank-ruptcy court for a £793 million settlement.

The bankruptcy court in Pittsburgh, has recommended the plan to the district court, which still needs to approve the settlement before ABB can draw a line under its asbestos troubles.

ABB's US unit Combustion Engineering made industrial boilers lined with asbestos, which can cause cancer and other diseases. The said it expected the final hearing to be held soon.

If the district court approves the reworked plan, there will be a 30-day appeals period.

However, if no appeals are lodged, the plan is final, the company said.

Vontobel analyst Panagiotis Spiliopoulos said: "In the best-case scenario the whole Combustion Engineering issue should be finalised by February 2006. With this decision ABB moves closer to the finishing line."

Chief executive Fred Kindle said: "We are pleased with the decision. The court ruling is a further vital step toward a final resolution of the asbestos issue."

A final district court ruling will end years of legal wrangling and put a cap on asbestos claims filed by thousands of workers in the United States.

ABB's original plan was thrown out by a US court last year.

The company then reworked the plan, adding an £131 million to the package, bringing the total amount of the settlement to £809 million.

The bankruptcy court's decision to approve the reworked settlement followed a vote by asbestos claimants in September 2005, in which they overwhelmingly approved the plan.

A second, smaller source of conflict over asbestos is ABB's Lummus Global pre-packaged plan. ABB said that plan, which was backed by 96 per cent of claimants in a vote, was still pending.

The maker of industrial robots and electronic motors expects its credit rating to return to investment grade within months of a final decision, restoring its financial credibility.

In the credit derivative market, the cost of insuring ABB's debt against default fell on the news of the court approval.

Five-year credit default swaps on ABB dropped about five basis points, to 69 basis points on a mid-price basis, a dealer in London said.

Credit analysts at Dresdner Kleinwort Wasserstein said the court's move brought the settlement "an important step closer" but warned that default swap levels already priced in a return to investment grade.

Analysts at SEB said: "ABB's operational performance and financial profile are already consistent with investment grade ratings.

Once ABB receives final approval of its asbestos plan we are likely to upgrade our credit view of the company."

ABB came to the brink of financial collapse in 2002 after an acquisition spree left it weighed down with debt.

It has since managed a turnaround and is set to beat its full-year profitability target after better-than-expected third-quarter net earnings in October.

The maker of transformers used in refineries and pipelines has benefited from higher oil prices as enriched energy companies ramp up investments to increase capacity. ..SUPL: