January 14, 2015 / 5:45 PM / 5 years ago

Garlock offers revised bankruptcy deal for asbestos claims

NEW YORK, Jan 14 (Reuters) - EnPro Industries and a bankrupt subsidiary, Garlock Sealing Technologies, have struck a deal with a plaintiffs’ lawyer to set aside $357.5 million to cover asbestos related claims, but others are expected to oppose the deal.

EnPro and Garlock, a bankrupt maker of asbestos-lined gaskets, said in a release late on Tuesday that the agreement could be approved in 15 to 24 months as part of an amended reorganization plan it will submit to the North Carolina court where Garlock filed for Chapter 11 bankruptcy in June 2010.

If approved, the plan would allow a reorganized Garlock to shed its liability for asbestos litigation, the latest phase in a bankruptcy touted by manufacturers as fundamentally shifting the legal terrain in asbestos cases in their favor.

The companies estimated the deal’s after-tax value to be roughly $205 million.

The deal was struck with an attorney representing people with future claims for an cancer known as mesothelioma and other asbestos-related health issues.

But EnPro and Garlock said they expect a separate group of plaintiffs’ lawyers representing current asbestos plaintiffs to take the unprecedented step of breaking with the future claimants and challenge the deal.

Those lawyers had previously asked Judge George Hodges to make Garlock put aside up to $1 billion for estimated asbestos claims. Garlock said that figure was inflated by fraud and manipulation in past settlements.

Following a trial, Hodges in January estimated Garlock’s asbestos liability to be just $125 million, and criticized plaintiffs’ lawyers for “infect(ing) fatally the settlement process and historic data.”

EnPro CEO Steve Macadam said in an investor call on Wednesday that the company had attempted to negotiate a settlement of asbestos claims with representatives for both groups of claimants. Macadam said that while a consensual deal would have been preferable, support from future claimants would help the plan win approval.

The agreement marks the first time in an asbestos-related bankruptcy that representatives for future and current claimants had split over a health claims funding agreement, Macadam said.

Asbestos plaintiffs’ lawyer Peter Kraus said the agreement violated a requirement that asbestos trusts secure approval from 75 percent of claimants.

Macadam said that, based on Hodges’ ruling, he believed the majority of Garlock’s liability came from future asbestos claims.

Garlock has also taken the unusual step of suing five plaintiffs’ firms for alleged abusive behavior in asbestos cases. Those cases are pending. (Reporting by Jessica Dye; Additional reporting by Tom Hals in Delaware; Editing by Christian Plumb)

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