Creditors Raise Objections to W.R. Grace Bankruptcy Reorganization Plan

W.R. Grace & Company’s recently developed reorganization plan, which they had hoped would ease the company out of bankruptcy, has been rejected by the company’s creditors.

A total of 20 separate entities have raised objections to the reorganization plan that was submitted to Judge Judith Fitzgerald’s bankruptcy court in September. Most of the objections to the plan were submitted by lenders, investors, and insurers.

Creditors have objected the reorganization plan on the grounds that the plan would result in their claims being paid at an interest rate two percent below of what they feel they deserve.

Lewis Kruger, an attorney who represents the committee of creditors, says the issue is that the company was never insolvent, and should therefore not be allowed to pay bankruptcy interest rates.

Several banks, which have carried W.R. Grace & Company through its seven year period of bankruptcy, are also arguing the same point. The banks claim the company overestimated the value of the asbestos-related lawsuits that forced them into bankruptcy.

According to Lewis Kruger, “The Debtors cannot in good faith argue that there is a question concerning their solvency when they have disclosed that they are solvent with very valuable equity interests post-emergence.”

Other entities that have objected include bankruptcy trustee Roberta De Angelis, who appointed the lawyers who were involved in negotiating the reorganization. Canada’s attorney general has also objected the plan.

The biggest and most vocal objection has come from Libby, Montana, which is the town where W.R. Grace & Company mined vermiculite-containing asbestos for several decades.

As of today, the average plaintiff in a Libby case has received anywhere between $270,000 to $1.5 million, depending on whether they have developed a non-malignant asbestos-related disease or a more severe condition such as mesothelioma.

Malignant mesothelioma is a rare form of cancer that is almost exclusively attributable to asbestos exposure. Most cases of the disease are diagnosed in the late stages of development, which often presents limitations for mesothelioma treatment options.

Under W.R. Grace’s reorganization plan, a claimant who lives in the Montana town would not receive any more compensation than any other asbestos claimant. This is an issue because other non-Libby plaintiffs often sue multiple companies, raising issues such as relative fault and causation.

This entry was posted on Friday, November 14th, 2008 at 2:53 pm and is filed under Asbestos Legislation, Asbestos Litigation, Mesothelioma. You can follow any responses to this entry through the RSS feed. Responses are currently closed, but you trackback from your own site.