W.R. Grace, Affiliates Reach Tentative $3B Settlement on Asbestos Claims

Columbia, Md.-based W.R. Grace & Co. Inc. has reached a proposed settlement of all current and future asbestos-related personal injury claims against the company in a move the chemicals giant hopes will eventually allow it to emerge from bankruptcy. Grace filed Chapter 11 bankruptcy in 2001, facing huge liabilities related to asbestos. The company said Monday that it has reached the tentative settlement with a committee of asbestos personal injury claimants, a representative handling future claims, and a committee of Grace stockholders.

Terms of the agreement will require Grace to make cash payments over a period of time into a trust fund for asbestos victims. Additional cash contributions will be paid to the trust by Sealed Air Corp. and Fresenius Medical Corp., both formerly affiliated with Grace, according to John D. Cooney of the Chicago law firm of Cooney and Conway. Grace agreed that all of its remaining insurance coverage will be used for the benefit of the asbestos victims, Cooney said, and the company also agreed that the trust fund will receive warrants for its stock shares at an agreed price. The total value of the payments and equity is approximately $3 billion dollars, according to Cooney.

Grace, which manufactured asbestos containing products from 1938 until the 1970s, makes silica-based and aluminum-based catalysts used in industry, and specialty chemicals and materials used in construction and food and beverage packaging. When it filed for bankruptcy protection in April 2001, the company said it had been named in 325,000 asbestos personal injury claims. Yesterday's tentative settlement would be tied to Grace filing a reorganization plan with the bankruptcy court, which the company hopes to do by late this year or early 2009, and emerge with no further obligations for asbestos injury liability. That plan would hinge on getting financing and court approvals, among other things.

The announcement of the settlement was made at a scheduled bankruptcy hearing before Judge Judith Fitzgerald in Pittsburgh. Parties expected the judge to set the matter for an additional hearing later this month.

Last month, the Justice Department announced that Grace had agreed to pay a record-setting $250 million to reimburse the federal government for the costs of the investigation and cleanup of asbestos contamination in Libby, Mont. With 6,500 employees and operations in more than 40 countries, Grace has had annual sales of more that $3.1 billion for its industrial chemicals and food packaging during its bankruptcy period, the company said in a statement.

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