Wednesday, January 9, 2008

W.R. Grace's Bankruptcy Trial

W.R. Grace, a company that initially registered on many civil procedure professors’ radars after its role in A Civil Action, will begin its bankruptcy trial on January 14. Amidst its creditors are a number of asbestos claimants. Peg Brickley of the Wall Street Journal reports:

If the answer from U.S. Bankruptcy Judge Judith Fitzgerald is $700 million or a little more, Grace and its shareholders are safe and on their way out of bankruptcy, with enough value to cover the asbestos-damage bill and have something left over for shareholders.

But if Judge Fitzgerald estimates asbestos liabilities at levels argued by plaintiffs' lawyers, Grace is destined to become the property of people damaged by its toxic products, and shareholders will be out in the cold.

Experts for the asbestos camp say Grace's liabilities are at least $3.7 billion. "If the asbestos experts are even close to right, then the equity in this company is severely at risk, or it will simply be wiped out," said Roger Frankel, a lawyer for asbestos creditors.

Investors are betting heavily that Grace -- bankrupt for more than six years and under criminal indictment for allegedly covering up its asbestos troubles -- will be the Chapter 11 case where phony claims are finally exposed, and "junk science" trashed.

Speculators pounce on every court filing, and are paying $25 a share for the stock -- an unusually high amount for a company in bankruptcy. That is a vote of confidence for the company and the litigator spearheading Grace's hard-fought bankruptcy case, one lawyer said.


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