W.R.Grace Files Chapter 11
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Monday April 2, 11:41 am Eastern Time COLUMBIA, Md. (AP) -- Chemical maker W.R. Grace filed for Chapter 11 bankruptcy protection, saying the federal courts can deal with a burgeoning number of asbestos claims more fairly than state courts can. The filing, in U.S. Bankruptcy Court in Wilmington, Del., will allow the company to continue to operate normally, Grace said Monday. The company's foreign subsidiaries were not included in the filing. The chemical maker said it plans to work closely with asbestos claimants and other creditors to address valid asbestos claims. Grace said it also has arranged $250 million in financing from the Bank of America. If approved by the bankruptcy court, Grace said it plans to use the money to pay vendors and suppliers, among others. Grace produces catalysts and silica products, specialty construction chemicals, building materials, and container products. The company has annual sales of about $1.6 billion and more than 6,000 employees. "This is a voluntary decision that, although very difficult, was absolutely necessary for us,'' said Paul J. Norris, Grace's chairman, president, and chief executive. "We believe that the state court system for dealing with asbestos claims is broken, and that Grace cannot effectively defend itself against unmeritorious claims. The best forum available to Grace to achieve predictability and fairness in the claims settlement process is through a federal court-supervised Chapter 11 filing.'' Grace officials had warned in January that continuing losses related to asbestos claims might force the company to file for bankruptcy protection. The company posted a fourth quarter 2000 loss of $107.6 million, or $1.65 a share, due mostly to asbestos litigation. More than 48,000 bodily injury claims were failed against Grace last year, 81 percent more than in 1999, the company said. In all, more than 124,000 claims have been filed against the company. Asbestos is a fibrous mineral once commonly used in insulation and fireproofing material. The inhaling of asbestos fibers can cause lung cancer and other deadly respiratory ailments, sometimes decades after the exposure. Tens of thousands of lawsuits are filed every year by people who claim that their health problems are caused by asbestos. Grace said that until recently, the company was able to settle claims through direct negotiations, but claims increased 81 percent last year, in part because of the Chapter 11 filings of other companies with asbestos-related cases, including Owens Corning [NYSE:OWC - news] and Armstrong World Industries Inc [NYSE:ACK - news]. Charles T. Smith II, who has represented manufacturers in asbestos cases, agreed with Norris that the system is broken, but not because it favors either claimants or companies. The system is simply overwhelmed by the ``sheer volume'' of claims, Smith said. "I don't think anyone could have foreseen the number of claims that have come up for the last 20 years,'' said Smith, a Silver Spring attorney. ``Frankly, I don't see any end in sight. It just takes so very long for the manifestations of any of the diseases to appear... You don't know who's out there that may be sick five years from now.'' Smith said companies are frustrated when they are sued by claimants who can prove exposure but do not suffer from health problems. The other side of the issue, however, is that that some of those claimants might develop serious health problems in the future. *** POSTED APRIL 2, 2001 *** |