After ducking asbestos claims for 13 years, W.R. Grace in February of this
year finally emerged from Chapter 11 bankruptcy. W.R. Grace was one of
the worst polluters on Earth. At the time they filed, they were facing
over 100,000 personal injury and death cases, primarily stemming from
the use of fireproofing and plaster products. W.R. Grace gained notoriety
as the company which contaminated the tiny mountain town of Libby, Montana
with tremolite asbestos from the mining of asbestos laced vermiculite.
At the time they filed, in 2001, WRG stock was around $1.50 a share. When
they emerged from bankruptcy protection 13 years later, the stock was
selling at $92 a share. It pays to duck responsibility? You decide.
Part of its court-approved bankruptcy reorganization plan was the establishment
of two trusts to pay personal injury claimants and property owners. The
trusts are funded by more than $4 billion in cash, stock warrants, insurance
proceeds and other sources.
This August, the trust began accepting Proof of Claim forms. According
to their Trust Distribution Procedures, (basically their
instruction manual) the Scheduled Average Value for a claimant diagnosed with mesothelioma
is $180,000. The value for asbestos-related lung cancer is $42,000. However,
the actual payment percentage is 26% of the Scheduled Value.
A claimant is free to seek a value greater than the Scheduled Value by
requesting the Trust perform an Individual Review of the claim. However,
this does not guarantee a greater value or even an equal value as the
Scheduled Value. The Maximum Value for this type of review for a mesothelioma
claim is $450,000 before applying the liquidated payment percentage of
26%. For an asbestos-related lung cancer, the Maximum Value of an Individual
Review claim is $95,000
To qualify for payment, a claimant must provide credible medical and exposure
evidence as defined in the
instruction manual (TDP).
The claims are paid on an
impartial first-in-first-out basis.
Now, if a claimant was unfortunate enough to have filed a claim prior to
April 2, 2001 against WRG as a part of a lawsuit but was never paid, they
would have to follow the conditions outlined in the TDP, but the claim
would be reviewed sooner.
The WRG bankruptcy is the longest in a long line of bankruptcies filed
by the asbestos superpowers. It's a sordid tale, and a long and desolate
trail, but for those with the stomach, and the patience, here's a
timeline. As they say, justice delayed is justice denied. What do you
think? Will MBA students be studying the WRG bankruptcy as an example
of what not to do in corporate america? Or will they be looking at it
as a brilliant business move that saved the company billions and enriched
thousands of shareholders?
- In April of 2001, WRG is named in more than 325,000 asbestos-related personal
injury lawsuits. They soon announce they have filed for voluntary Chapter
11 bankruptcy protection.
- In May of 2001, WRG gets approval from the U.S. Bankruptcy Court to receive
a $250 million loan from Bank of America, to help support operations.
- In February of 2003, WRG asks the U.S. Bankruptcy Court to allow an extension
of its $250 million loan agreement with Bank of America for another three years.
- In October of 2004, WRG makes a request to delay filing a reorganization
plan, hoping to continue negotiations with creditors. WRG also is notified
they are a target of a federal grand jury investigation, facing indictments
on several charges including interfering with an EPA investigation, violating
the Clean Air Act and placing asbestos materials in schools and local
residences and conspiring to conceal the resulting health problems.
- In November of 2004, WRG files a reorganization plan with a Delaware court
which is soon approved.
- In January of 2005, WRG files an amended bankruptcy protection plan with
a Delaware court.
- In September of 2005, WRG opens a new China headquarters in Shanghai, which
consolidates four other offices in the country.
- In December of 2005, WRG announces they have spent $20 million in the year
2005 on legal defense costs.
- In February of 2006, WRG announces it will open a new manufacturing facility,
costing $20 million, in Mt. Pleasant, Tennessee.
- In April of 2008, WRG reaches a tentative settlement on all current and
future asbestos-related claims, worth $2 billion.
- In January of 2011, WRG latest bankruptcy reorganization plan is approved
by Judge Judith Fitzgerald in Wilmington, Delaware.
- In January of 2012, WRG’s bankruptcy reorganization plan is approved
by a judge of the U.S. District Court.
- In November of 2012, WRG announces it will pay cash, not stock, to settle
a larger share of the asbestos-related injury claims against the company.
- In December of 2012, WRG announces its total payments to date with its
bank lenders, including interest is at $1.1 billion dollars.
- In February of 2014, WRG emerges from bankruptcy protection.
Wall Street Journal provided an excellent WRG trip summary.
- The original bankruptcy judge, Alfred Wolin, was ordered off the case under
fire from distressed-debt investors who fretted he was too friendly with
the asbestos plaintiff’s camp.
- A criminal indictment of the company and some executives, accused of knowingly
allowing dangerous asbestos contamination to spread. WRG and its executives
beat the charges, after a trial before a jury in Montana.
- Some dark comedy, such as the asbestos-disposal solution WRG pursued for
years in a Minneapolis neighborhood: Advertise asbestos-contaminated material
as “free crushed rock” and invite the neighbors to come haul
it away to decorate their lawns, firm up their driveways. WRG cleaned
up the contamination.
Was it all worth it? Earlier this month, WRG showed off its new 90,000-square-foot
global headquarters building along with several laboratories at its 160-acre
Columbia, Maryland campus.