W.R. Grace Reorganization Includes Asbestos Fund

The reorganization plan filed by W.R. Grace & Co. in its Chapter 11 bankruptcy case includes a proposal to establish a trust to handle a variety of asbestos claims against the chemical manufacturer.

The reorganization plan, filed in U.S. Bankruptcy Court in Wilmington, Delaware, describes how Grace proposes to satisfy its asbestos and other Chapter 11-related claims.

A company spokesman refused to discuss the reorganization plan, but Grace, which filed for bankruptcy protection in April 2001 after it was overwhelmed by asbestos-related lawsuits, said in a news release that is proposing a maximum aggregate payment for all asbestos-related liabilities and related expenses of $1.6 billion. The company believes that amount would fund over $2 billion in claims, costs and expenses over time.

The trust would be authorized to handle all pending and future asbestos-related claims, including personal injury and property damage claims, as well as administrative costs and legal expenses.

Asbestos personal injury claimants would have the option to litigate their claims against the trust or accept settlements if they meet eligibility criteria. Asbestos property damage claimants would be required to litigate their claims through the trust.

The reorganization plan would take effect only upon approval by the court and eligible creditors. The company has requested a Dec. 20 hearing regarding its disclosure statement, which must be approved by the court before votes on the plan can be solicited.

While the company’s common stock would remain outstanding under the reorganization plan, the interests of existing shareholders would be subject to dilution for additional shares of stock issued under the plan.

In addition, the reorganization plan would prohibit a person or entity from acquiring more than 4.75 percent of the outstanding common stock or increasing holdings that already exceed that amount, for three years.

The court has issued an interim order imposing such restrictions pending the Dec. 20 hearing.

The initial filing deadline for the reorganization plan was Oct. 14, but the court granted an extension to permit Grace and representatives its creditors and future asbestos claimants to continue negotiations.

In a press release, the company said it had not been able to reach an agreement with all parties but decided to go forward with its filing.

In addition to handling the asbestos claims, the company said it would pay all allowed non-asbestos claims either in cash or in a combination of 85 percent cash and 15 percent common stock. Grace estimates that approximately $1.2 billion in claims would be satisfied in that manner.

Other non-asbestos related liabilities, estimated at about $508 million, would be satisfied as they become due over time, the company said.

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