W.R. Grace asbestos creditors seek to defeat company’s self-serving reorganization plan

PHILADELPHIA (AP) — W.R. Grace & Co.’s asbestos creditors on Monday filed their own version of a Chapter 11 reorganization plan, heating up the contest over how to end the specialty-chemical company’s stay in bankruptcy.

Grace and people claiming injury from its asbestos products have been at odds for years over how much the company must set aside to cover its liabilities before it can end the Chapter 11 proceedings it began in 2001.

The Chapter 11 plan proposed by asbestos creditors calls on Grace to set aside cash, equity or other assets sufficient to deal with $4 billion worth of liabilities linked to the toxic substance.

Grace’s own Chapter 11 plan is premised on a much lower estimate of the damages it owes for asbestos products, $712 million, according to one of Grace’s experts. The company’s version of a Chapter 11 outcome would also leave shareholders with a stake in the reorganized Grace.

That is not the case with the asbestos creditor version of a Chapter 11 restructuring for Grace, filed Monday in the U.S. Bankruptcy Court in Wilmington, Del.

Shareholders would see their stock canceled under the asbestos creditors’ plan, unless Grace gains sufficient value to cover its asbestos liabilities and other debts and still has value to spare.

Shareholders lose all in most corporate Chapter 11 cases, but there have been cases, including asbestos-driven bankruptcies, where shareholders have held on to their interests. In recent years, USG Corp. and Owens Corning Inc. ended long stays in bankruptcy and long battles with creditors without stripping shareholders of everything.

Monday’s rival Chapter 11 plan proposal comes in the wake of a July ruling in which a judge stripped Grace of exclusive rights to control its bankruptcy proceedings. Judge Judith Fitzgerald gave lawyers representing people claiming injury from Grace asbestos products the right to file their own Chapter 11 proposal in hopes the threat of a rival plan could push Grace to negotiate a settlement.

Grace, based in Columbia, Md., filed for Chapter 11 protection to shield itself from more than 135,000 asbestos-related lawsuits. The company blames resistance from asbestos creditors for stalling the six-year-old case.

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