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Business

Grace Files Reorganization Plan

by Marc S. Reisch
November 22, 2004 | A version of this story appeared in Volume 82, Issue 47

BANKRUPTCY

A bankruptcy reorganization plan filed by W.R. Grace with the U.S. Bankruptcy Court in Delaware caps asbestos liabilities at $1.6 billion, would pay all other claims in full, and allows current shareholders to retain a stake in the firm.

Grace filed the plan after a one-month deadline extension during which it failed to reach an agreement with creditors. The firm is seeking a December court hearing for the plan, which needs approval from the court and committees representing asbestos claimants and other creditors. Grace filed for bankruptcy in 2001 under the weight of about 118,000 asbestos-related personal injury claims.

The firm's plan calls for the court to establish a trust to pay asbestos personal injury claims, about 4,300 asbestos property damage claims, and administrative costs. Grace would fund the trust through a contribution of cash and stock that, with interest, could provide more than $2 billion for asbestos-related costs.

Proposed trust payments could be as little as $250, based on minimal requirements, but could be as high as $71,215 for a victim of mesothelioma, a fatal lung tumor caused by asbestos exposure.

Grace also faces $1.7 billion in other claims, including bank debt, environmental liabilities, pension claims, and tax liabilities. The firm expects to pay these claims in full with cash on hand, new debt, proceeds from product liability insurance, and stock.

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