http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a83q30oM2GKU

W.R. Grace & Co., a bankrupt chemical maker, may owe victims of its asbestos products as much as $6.2 billion -- more than four times the company's estimate -- said a legal scholar hired by attorneys suing the company.

Mark A. Peterson, a research scientist at the Rand Corp., estimated Grace will need to spend from $4.7 billion to $6.2 billion to resolve hundreds of thousands of asbestos cases over several decades.

``Because Grace continued to make and sell asbestos products after other defendants quit, it now faces greater and longer- extending asbestos liability than other defendants,'' Peterson said in papers filed June 20 in U.S. Bankruptcy Court in Wilmington, Delaware.

The Columbia, Maryland-based company used more stringent criteria to conclude last month that it owes a maximum of $1.31 billion. Early next year, the dueling estimates are set to be the focal point of a trial before U.S. Bankruptcy Judge Judith K. Fitzgerald, who will determine the value of the claims.

A third estimate, by another group of lawyers representing asbestos victims who haven't yet filed a claim, put Grace's liability at as much as $5.3 billion. Grace used asbestos, a flame-retardant mineral linked to lung cancer and other lung diseases, in construction materials.

Final Figure

The final figure will be used to set up a victims' trust funded by Grace and its insurers. The company filed for bankruptcy in 2001 to protect itself from at least 135,000 asbestos claims.

Since then, Grace has battled with lawyers for asbestos victims about how to structure the trust.

Company spokesman Greg Euston declined to elaborate on Grace's estimate.

Grace made insulation containing asbestos until the early 1990s, according to court records. Before it went bankrupt, the company's asbestos liabilities grew faster than those of other major manufacturers because Grace kept using the fire-resistant substance. Its rivals eliminated it from their products by 1980, Peterson wrote.

The company faces federal criminal charges and civil lawsuits related to its former vermiculite ore mine near Libby, Montana, where town residents claim the company is responsible for exposing them to asbestos.

Civil Cases

While Grace is in bankruptcy, none of the civil asbestos cases against it can go forward. The criminal case is on hold pending legal appeals.

``Grace has become the most visible and criticized asbestos defendant in the U.S., even while its bankruptcy has prevented continuing litigation,'' Peterson claimed in his report.

Grace made more than 200 products containing asbestos that it sold directly to the public or used in different industries.

Most of the company's liability will come in the future, Peterson estimated. The company's pending cases will cost it about $578 million, while future claims will cost $5.1 billion. The total, $5.68 billion, is the figure Peterson said was the most reliable in his estimated range.

Asbestos-related illnesses can take decades to affect the victim, so the number of claims related to Grace's products hasn't yet peaked, Peterson said. Other asbestos defendants are seeing the claims they face decline because they quit using asbestos at least a decade earlier, Peterson said.

Grace proposed settling all the lawsuits as part of its plan to exit bankruptcy.

Under a plan proposed last year by Grace, the victim compensation fund would be no larger than $1.48 billion, according to court papers filed by asbestos lawyers. The company earned $179.6 million last year on sales of $2.83 billion.

Shares of Grace rose from a low of 95 cents in October 2002 to a high of $30 on April 17. Shares rose 1 cent to $24.50 today in New York Stock Exchange composite trading.

The case is In re: W.R. Grace, 01-1139, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net .

*** POSTED JULY 2, 2007 ***