Recovery Plan Is Filed by Grace

From Bloomberg News

W.R. Grace & Co., a maker of chemicals and building materials, filed a bankruptcy reorganization plan that would limit its asbestos-related debts to $1.61 billion and leave shareholder interests mostly intact.

The 150-year-old company filed for bankruptcy in April 2001 to cope with more than 325,000 asbestos-injury lawsuits. It submitted the recovery plan Saturday to the U.S. Bankruptcy Court in Wilmington, Del., after failing to reach agreement with four groups representing creditors and shareholders during a one-month deadline extension that ends this month.

“The central task in these Chapter 11 cases has always been to define the debtors’ true liability to asbestos claimants,” Grace said in papers filed with the plan.

Shares of Grace, USG Corp., Owens Corning and other companies forced into Bankruptcy Court by asbestos debt have climbed this year on speculation that they might reach legal settlements. They rose further on optimism that Republican victories in this month’s elections would boost prospects for creation of a nationwide trust to end the lawsuits.


Grace shares closed at $14.41 on the New York Stock Exchange on Friday. They have risen more than fivefold this year and traded as low as $2.05 in February.

David Bernick and James Sprayregen, Grace’s bankruptcy lawyers, didn’t return telephone calls seeking comment. Tom Mayer, lawyer for Grace’s shareholders in the case, and Scott Baena, a lawyer for property-damage claimants, also didn’t return calls.

Under the plan, Grace shareholders wouldn’t have their interests canceled, as is typical in bankruptcy reorganizations. The value of the shares may be diluted because new stock would be issued under the plan, Grace said. The plan estimates the value of the reorganized company is about $1.96 billion. The company’s market value on Friday was $951 million.

Grace proposed creating a trust to handle personal-injury and property-damage claims associated with asbestos products the company once made. The trust would be funded with $512.5 million in cash from a December 2002 settlement with Sealed Air Corp. and 9 million shares of Sealed Air. Grace would also contribute as much as 50.1% of its shares, court papers show. Sealed Air shares closed at $52.83 last week, giving the 9 million shares in the plan a value of about $475 million.

Proposed payments for personal-injury claims of people who can prove specific health impairment would range from $4,459 for lung inflammation to $71,215 for cancer, court papers show.

Personal-injury claimants who don’t show symptoms of disease would be offered $250 settlements or the option of litigating their claims against the trust. Such claims wouldn’t be capped and Grace will put stock options into the trust to pay them. If the stock options are insufficient, the company would be obligated to pay the additional liability in cash, Grace said.