Garlock Sealing files amended plan based on asbestos claim resolution

By Caroline Salls

Pittsburgh, May 30 - Garlock Sealing Technologies LLC filed its first amended plan of reorganization and related disclosure statement Thursday with the U.S. Bankruptcy Court for the Western District of North Carolina.

As previously reported, the amended plan provides $275 million for resolution of all unsettled current asbestos claims and future asbestos claims and incorporates a bankruptcy court ruling that $125 million is enough to satisfy Garlock's total liability for present and future mesothelioma claims.

Specifically, the plan calls for a $245 million settlement facility that would receive and settle claims for cash payments based on objective criteria outlined in the plan and a $30 million litigation facility that would defend suits by claimants who choose to litigate.

Under the plan, in addition to paying claimants choosing to settle, the settlement facility would contribute amounts necessary to defend and resolve each claim subject to litigation up to the settlement amount for which a litigating claimant would qualify under the facility's resolution procedures. The litigation facility would pay all costs in excess of that amount.

In addition, the plan requires asbestos claimants alleging they reached legally binding settlements before Garlock's Chapter 11 filing to file proofs of claim.

Any claimants proving they have binding settlements will be paid in full by Garlock. These payments would be in addition to the company's payments to the settlement and litigation facilities.

Settlement facility

Parent company EnPro Industries said on Thursday that the $245 million settlement facility will be funded by a $215 million lump-sum cash contribution from Garlock and a $30 million lump-sum cash contribution by Garlock parent company and EnPro wholly owned subsidiary Coltec Industries, Inc.

EnPro said Coltec's $30 million contribution will permanently settle derivative claims seeking to hold Coltec and its affiliates, including EnPro, liable for asbestos diseases allegedly caused by Garlock's products.

Garlock will ask the court to confirm the plan, discharge asbestos claims against it, approve the settlement with Coltec and issue an injunction prohibiting claimants from bringing derivative claims against Coltec and its affiliates.

EnPro said the plan assures that all future claims will receive equivalent treatment to similar current claims and provides sufficient funding to cover all current and future claimants.

Litigation facility

Claimants who seek litigation will be entitled to have their cases heard before a jury in federal court. Litigation will be centralized in the U.S. District Court for the Western District of North Carolina.

EnPro said claimants will be required to disclose all of their asbestos product exposures and submit to audit procedures that prevent them from making inconsistent exposure allegations against bankruptcy trusts.

Creditor treatment

Treatment of creditors under the plan will include the following:

• Priority claims and secured tax claims will be paid in full in cash;

• Holders of non-tax secured claims will either be paid in full in cash or their rights will remain unaltered;

• Holders of settled asbestos claims and general unsecured claims will be paid in full in cash plus post-bankruptcy interest;

• Each holder of a convenience claim will receive $100;

• Holders of Anchor Packing Co. claims will receive nothing because Anchor will be liquidated and dissolved;

• Intercompany claims will be preserved by the plan;

• Garlock and Garrison Litigation Management Group, Ltd. equity interests will be canceled and new equity interests will be distributed to a newly formed subsidiary of EnPro Industries; and

• Garrison will retain its Anchor equity interest.

Plan comparison

In comparison, treatment of creditors under the original plan submitted in November 2011 would have included the following:

• Holders of priority claims, secured tax claims and general unsecured claims would be paid in full in cash;

• Holders of secured claims would receive the amount of their claims by either retaining their security, accepting a return of the collateral, accepting the proceeds from the sale of the collateral, accepting a cash payment, accepting continued payment under existing agreements or negotiating other terms;

• Holders of Garlock asbestos convenience class claims would receive $1,000 cash payments;

• Holders of current Garlock asbestos claims would be paid in full in cash;

• All allowed future Garlock asbestos claims would be paid in full in cash;

• Holders of inactive Garlock asbestos claims would receive from the GST Asbestos Trust a medical monitoring distribution and would retain the right to the same treatment as future asbestos claims should the holder be diagnosed with asbestos-caused cancer;

• Holders of Anchor claims would receive nothing;

• Intercompany claims would be considered satisfied on the plan effective date; and

• Coltec would retain its 100% equity interests in the reorganized companies, with 51% of the voting stock of each reorganized company pledged to secure future funding commitments to the GST Asbestos Trust.

Coltec would have provided $30 million to the reorganized companies on the plan effective date under the original plan to satisfy allowed current asbestos claims. The reorganized Garlock Sealing would have transferred $60 million to the trust and committed to future cash payments of $140 million to the trust.

Garlock is a subsidiary of Charlotte, N.C.-based EnPro Industries, which makes sealing products, bearings, compressors and engines. Garlock filed for bankruptcy on June 5, 2010, and its Chapter 11 case number is 10-31607.

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