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| Business - Reuters - updated 9:04 PM ET Apr 5 |
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By Mary Kelleher WILMINGTON, Del. (Reuters) - Specialty chemicals maker W.R. Grace & Co. (NYSE:GRA - news) on Monday said it filed for Chapter 11 bankruptcy protection because of a rising number of asbestos-related injury claims. A surge in allegedly ``unmeritorious'' asbestos claims prompted Grace's filing, the company said. Claimants also are seeking more damages from Grace because other companies fighting the litigation already filed for Chapter 11, it said. Grace, which employs 6,000 people worldwide and generates about $1.6 billion in sales a year, is the latest in a string of companies compelled to seek voluntary bankruptcy protection because of costly asbestos claims. Asbestos is an indestructible fireproof insulator that can cause lung cancer and other serious diseases when its fibers are inhaled. Widely used in the late 19th century, it became a health concern in the 1950s and companies who made it or put it in products have been sued. Asbestos-related litigation has bankrupt 26 companies since 1982, Grace said. ``We believe that the state court system for dealing with asbestos claim is broken, and that Grace cannot effectively defend itself against unmeritorious claims,'' Paul Norris, Grace's chairman, president and chief executive said. Rating agencies Standard & Poor's and Fitch lowered their ratings on Grace's debt on Monday after the announcement. Grace to date has been hit with more than 325,000 asbestos personal injury claims and paid out $1.9 billion to resolve and manage such litigation. It said asbestos-related claims rose 81 percent in 2000, and even more than that in the first three months this year. The claims against Grace stem from a practice -- dropped in 1973 -- of buying asbestos and adding it to some of its fire protection products. The bankruptcy filing marks a low point in the chemical company's long history. Started in Peru in 1854 by William Russell Grace, a two-term New York City mayor who accepted the Statue of Liberty from France, Grace had its roots in the merchant steamer industry. It later bought chemical companies, introduced a slew of silica, specialty chemical and packaging products, and now does business in nearly 40 countries. Grace said it will continue to operate normally while it comes up with a plan to deal with the asbestos claims. It said in papers filed on Monday at bankruptcy court in Delaware 62 entities, including the parent, filed for Chapter 11. None of its foreign units are included in the filing, Grace said. The case was filed in Delaware but at a Monday hearing Judge Randall Newsome gave the debtors five business days to show why it should not be transferred to another state since Grace is based in Maryland and has big creditors in New York. Grace's shares fell 78 cents to $1.52 on Monday on the New York Stock Exchange (news - web sites), well off their year high of $14.88. The company had said in January it was considering filing for Chapter 11, causing a sharp drop in its stock price. It joins the likes of buildings materials maker Owen Corning (NYSE:OWC - news) and a unit of floor and ceiling products maker Armstrong Holdings Inc. (NYSE:ACK - news), which also have filed for bankruptcy since early October because of asbestos cases. Grace said it had obtained $250 million in financing from Bank of America N.A. and that pending court approval, these funds could be used to continue current operations. Judge Newsome approved $50 million in interim financing under the credit line for the next 15 days, based on the company's estimate that it needed about $100 million to do business for the next 30 days. Grace listed $2.51 billion in assets as of Feb. 28, in court documents filed Monday in the court papers, as well $2.57 billion in debt and 65.6 million common shares held by about 12,109 stockholders. The company said it had more than 1,000 creditors and estimated funds would be available for distribution to unsecured creditors. Chase Manhattan Bank, a bank unit of J.P. Morgan Chase & Co. (NYSE:JPM - news) topped Grace's list of creditors holding the 20 largest unsecured claims, as the administrative agent for $253.5 million in bank debt syndicated among a variety of lenders. Court papers described the debt as a 364-day credit agreement among Grace, a Grace unit, Bank of America Corp. (NYSE:BAC - news), the National Trust & Savings Association as documentation agents, Chase Manhattan and Chase Securities, also part of J.P. Morgan Chase, as the bank manager. Chase also was listed as the administrative agent for a $250 million syndicated credit agreement. Other large unsecured creditors include Depository Trust Co., in New York, with public bonds due Aug. 16, 2004 valued at $5.74 million, CEDE & Co. with public bonds due Oct. 1, 2002 valued at $2.04 million, and the Los Angeles Unified School District with a litigation settlement note for $1.9 million, court documents showed. Grace listed FMR Corp, Peninsula Partners LP and The Baupost Group LLC as those who directly or indirectly control or own 5 percent or more of the debtor's voting securities. Earlier Stories
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