Armstrong World Industries Seeks Bankruptcy Protection
Facing massive potential liability over an asbestos insulation product it manufactured in the 1960s, Armstrong World Industries Inc. on Wednesday filed for protection from its creditors while it develops a reorganization plan under Chapter 11 of federal bankruptcy laws.
The manufacturer of floor and ceiling materials said it had tried several approaches to managing its asbestos liability but was faced with mounting costs from legal settlements that threatened its long-term financial health.
“Our historical approach to resolving asbestos claims has not worked. The actions that would now be required to wait for legislation--for which there is no reasonable hope for quick passage--would reduce our ability to invest in our businesses,” said Michael Lockhart, chairman and chief executive of Armstrong World’s parent company, Armstrong Holdings Inc., which was not part of the filing.
Armstrong World faces more than 175,000 personal-injury claims alleging harm from asbestos and estimated last month its potential liability could reach $1.4 billion.
Chase Manhattan Bank has agreed to provide $400 million in debtor-in-possession credit subject to approval by a federal court in Wilmington, Del., the company said.
Also filing for relief were two of Armstrong World Industries subsidiaries, Nitram Liquidators Inc. and Desseaux Corp. of North America Inc.
Armstrong said its businesses were operating as usual and suppliers will be paid on normal terms for goods and services provided after the filing. Employee pay and benefits will not be interrupted, the company said.
The company signaled a possible filing for bankruptcy protection to the U.S. Securities and Exchange Commission last month.
A group of banks led by Chase Manhattan halted a $400-million, one-year credit line for the company that would have replaced one that expired Oct. 19.
Armstrong Holdings employs 18,000 people worldwide and has annual revenue of more than $3.4 billion.
Shares in Armstrong Holdings closed off 13 cents at 94 cents on the New York Stock Exchange.