March 18, 2008, Philadelphia - W.R. Grace, the company that contaminated an entire town with asbestos, is in more financial trouble following the news that some lenders have refused to continue its bankruptcy loans.

W.R. Grace, the company that once mined asbestos-contaminated Vermiculite in the town of Libby, Montana has been forced to reduce its Chapter 11 finance package from $250 million to $200 million. The company’s existing bankruptcy package expires on April 1. Throughout most of the bankruptcy case W.R. Grace has had around $250 million in loans available; now that figure will be reduced by around 20%.

Janet Baer, a W.R. Grace attorney, told Judge Judith Fitzgerald, overseer of the company’s long-running bankruptcy restructuring efforts, that the company’s existing lenders had been asked to sign on for another two years, but some had declined to do so.

According to Baer, “the tightening of the credit industry” is to blame for the fact that some lenders have declined to renew their credit after having offered Chapter 11 loans to the company for several years.

The lender syndicate is headed by Bank of America Corp. Baer did not name the lenders that had declined to renew their credit to W.R. Grace.
Judge Fitzgerald has signed off on an order that allows the former Vermiculite-mining company to extend its Chapter 11 loans until 2010. W.R. Grace is still awaiting a ruling that will determine how much money it needs to set aside in a trust that will cover asbestos damages. The ruling is needed before the company can emerge from bankruptcy.

W.R. Grace is not the only bankrupt company that has had trouble retaining lenders throughout its Chapter 11 period. Many other bankrupt companies that were once sought-after lending clients are having similar problems.

Solutia Inc. emerged from bankruptcy in February, but only after the company had sued banks that had declined to offer $2 billion in exit loans. The lawsuit was settled before a decision was made. Delphi Corp. is another company having trouble with investors and lenders, as it struggles to emerge from bankruptcy.

W.R. Grace is not in immediate need of loans to fund its exit from bankruptcy. The company will face another two months or more of trial proceedings that will attempt to estimate how much money the company owes to people who have been affected by asbestos problems attributed to it.

The trouble is, a ruling isn’t expected until the middle of 2008, and both sides have already stated that they expect to appeal the decision.

According to documents filed with the Securities and Exchange Commission, W.R. Grace had $484.4 million in cash, and over $100 million in investments at the end of last year.
A week ago, the company finally agreed to pay $250 million to the federal government to help cover the cost of the Libby, Montana clean-up.

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