In a Nov. 5 statement, the chemicals maker projected that it could complete its reorganization by the end of 2013 if it received positive outcomes regarding pending appeals of the order confirming its reorganization plan.
Five appeals are pending in the U.S. Court of Appeals for the 3rd Circuit. The appeals generally deal with proposed interest rates, the validity of asbestos channeling injunctions and the classification of claims.
According to the statement, W.R. Grace anticipates presenting oral arguments to the court in the first quarter of 2013 and receiving a ruling in the third quarter. Should the court rule in W.R. Grace's favor, the Columbia, Md., company would exit bankruptcy by the end of next year, more than 12 years after filing for Chapter 11 on April 2, 2001.
The statements noted all five of the pending appeals have already been considered and overruled by the U.S. Bankruptcy Court for the District of Delaware in Wilmington and the U.S. District Court for the District of Delaware in Wilmington.
(Eight parties originally filed appeals to W.R. Grace's confirmation by a July 11 deadline. The debtor resolved two appeals, and a third party terminated its appeal.)
Judge Judith K. Fitzgerald of the bankruptcy court originally confirmed W.R. Grace's reorganization plan on Jan. 31, 2011. Judge Ronald L. Buckwalter of the district court affirmed confirmation on Jan. 30.
Asbestos-related bankruptcy plans are subject to the jurisdiction of the related U.S. district court under Section 524(g) of the Bankruptcy Code.
W.R. Grace, meanwhile, continues to wrap things up in bankruptcy court. On Oct. 30, the company filed a settlement regarding the common stock warrants its plan will provide to an asbestos personal injury trust.
The plan provides the trust with warrants to purchase 10 million shares of the debtor's common stock. The warrants would expire one year after the plan's effective date and have an exercise price of $17 per share.
W.R. Grace has already announced its intention to repurchase any shares outstanding following purchases by the trust and therefore proposed a deal it said would simplify the transaction.
Under a settlement with the other proponents of its plan, W.R. Grace would make a cash payment to the trust on the day the trust says it would want to exercise the warrants or when the warrants would expire. Under this scenario, no shares would change hands.
The debtor valued the settlement at $375 million to $490 million, depending on the stock price on the exercise date.
W.R. Grace said the cash settlement would substantially increase certainty with respect to its financing requirements and would prevent dilution of its common stock.
The agreement would also eliminate the requirement for the trust to pay the exercise price of $170 million in cash and eliminate any other transaction costs.
The company noted the value of the warrants has increased significantly since confirmation. For example, during the period between Aug. 1 and Oct. 26, W.R. Grace's stock increased to $64.66 from $55.71.
The settlement also allows the trust to opt out of the cash settlement if W.R. Grace had a change in control before the warrants' expiration date. Under that scenario, the trust could either take the cash settlement or purchase the stock. If the trust wanted to buy the shares, W.R. Grace asked that the court set a minimum and maximum price of $54.50 and $66, respectively, for the shares.
Fitzgerald is scheduled to consider the cash settlement on Dec. 17.
Founded in 1854, W.R. Grace is a building materials and industrial catalysts manufacturing company with operations in more than 40 countries.
When the company filed for Chapter 11 on April 2, 2001, it was already involved in 65,000 asbestos-related personal injury lawsuits involving more than 129,000 claims. At the time, it pegged its assets and liabilities at roughly $2.6 billion and $2.7 billion, respectively.
W.R. Grace proposed a reorganization plan along with its asbestos claimants' committee, the asbestos personal injury future claimants' representatives and its official equity committee. Along with the stock warrants, the plan provides the trust with $250 million and the rights to proceeds under the company's asbestos-related insurance coverage, cash and stock arising from settlements with other third-party defendants, and deferred payments of $110 million per year for five years between 2019 and 2024 -- backed by more than half of the reorganized company's stock in the event of default.
A second trust for asbestos claimants would contain about $112 million for property damage claims to be paid in full on the plan's effective date.
Curtis A. Hehn of Pachulski Stang Ziehl & Jones LLP and Theodore L. Freedman of Kirkland & Ellis LLP are debtor counsel.
Elihu Inselbuch of Caplin & Drysdale Chtd. and Marla Eskin and Mark Hurford of Campbell & Levine LLC represent the official committee of asbestos personal injury claimants.
Roger Frankel, Richard Wyron and Debra Felder of Orrick, Herrington & Sutcliffe LLP and John C. Phillips Jr. of Phillips, Goldman & Spence PA are counsel to future asbestos claimants.
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