UPDATE 2-Circor unit files for bankruptcy over asbestos claims

Mon Jul 12, 2010 11:30am EDT

* Ch 11 protection to stem litigation costs

* Circor to record $28.8 mln charge

* Circor shares up 5.5 pct

(Recasts; Adds details, background, share movement)

July 12 (Reuters) - Industrial machinery maker Circor International Inc (CIR.N) put its valve manufacturing subsidiary Leslie Controls Inc under bankruptcy protection in a bid to isolate and resolve asbestos-related personal injury claims.

Shares of Circor were up as much as 5.5 percent on Monday as the pre-negotiated court protection helps the company reduce costs and removes a big overhang on the stock.

"The cost of this defense has exceeded the profits generated by Leslie's operations," said Bill Higgins, chief executive of Circor.

Circor will record a charge of $28.8 million in the second quarter due to the bankruptcy.

Circor will also record $5 million of post-bankruptcy charges mostly in the third quarter, the company said in a conference call with analysts.

Since 2002, Leslie has been named in a number of asbestos-related personal injury claims relating primarily to the use of asbestos on U.S. Navy ships from the 1940s to the 1980s -- prior to Leslie's integration into Circor.

It currently has about 1,307 pending asbestos personal injury claims against it, court papers show. Between 2006 and 2009, gross indemnity and defense costs totaled $54.1 million for the company.

Leslie Controls is the third company in less than two months to use the U.S. Bankruptcy Code to resolve its asbestos woes.

Last month, EnPro Industries Inc's (NPO.N) Garlock Sealing Technologies LLC subsidiary and two units of RPM International Inc (RPM.N) also filed for bankruptcy to resolve asbestos-related lawsuits. [ID:nSGE65D0IN]

Asbestos, once widely used in manufacturing, has been partially banned by the U.S. government after it was proven to cause cancer, often in people who were exposed by breathing in asbestos particles.

According to the bankruptcy plan, a new trust will be created to handle all current and new litigation claims providing both Leslie and Circor with permanent court protection from such claims, the parent company said in a statement.

Funding for the trust will consist of a $75 million contribution by Leslie and Circor, and proceeds from Leslie's remaining asbestos insurance assets.

Leslie, which employs 178 people and recorded net revenue of over $35 million in 2009, could exit bankruptcy in 120 days, Circor said in a statement. In its Chapter 11 petition, Leslie, which makes process control valves, listed assets in the range on $10 million to $50 million and liabilities of $50 million to $100 million.

Shares of Circor were up $1.03 at $27.39 Monday on the New York Stock Exchange. They touched a high of $27.81 earlier.

The case is In re: Leslie Controls Inc, U.S. Bankruptcy Court, District of Delaware (Delaware), No: 10-12199. (Reporting by A.Ananthalakshmi and Santosh Nadgir in Bangalore; Editing by Prem Udayabhanu)

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