Garlock negotiates plan deal to pay $327.5 million of asbestos claims

By Kali Hays

New York, Jan. 14 – Garlock Sealing Technologies, LLC has reached a deal with the court-appointed representative of all future asbestos claims, Joe Grier, on a consensual plan of reorganization, according to a release from parent company EnPro Industries, Inc.

If the amended plan is approved by the U.S. Bankruptcy Court for the Western District of North Carolina and implemented, EnPro said that it will “provide certainty and finality to the expenditures necessary to resolve all current and future asbestos claims against Garlock” and other subsidiaries.

Under the revised plan, a total of $357.5 million would be required to resolve all of the asbestos claims and pay related administrative fees. This amount includes $250 million to be made available on the effective date of the plan and an additional $77.5 million over the following seven years.

An initial $30 million would also be provided on the plan effective date to cover litigation costs related to those claimants that forego the settlement options and pursue claims in federal court, according to the release.

A contingent guarantee is also included in the plan that would provide additional litigation funding, with a present value of $31 million, over a period of 40 years, if necessary.

“EnPro believes that if the plan works as envisioned and claimants act in their economic and best interests, the guarantee will prove to be largely unnecessary,” the release stated.

Grier agreed to support, recommend and vote in favor of the amended plan, which provides payments “to all claimants with a compensable disease.”

EnPro estimates the after-tax, net present value of the revised plan to be $205 million, and will not exceed $236 million. An additional pre-tax amount of $12 million is expected to be paid to non-asbestos creditors and to some settled but unpaid asbestos claims, according to the release.

The settlement and litigation facilities will be funded primarily from Garlock’s cash balances and remaining insurance and are anticipated to be tax deductible.

EnPro president and CEO Steve Macadam said the revised plan is “true to the principles” of the claims estimation decision rendered in January 2014 “but pays significantly more dollars to claimants, ensuring it will be attractive to them and ultimately bring closure to the asbestos claims reconciliation process,” according to the release.

Continued opposition to the plan is expected from the committee representing current asbestos claimants and EnPro said “it could take 15 to 24 months from now to reach confirmation” and committee appeals “could delay the case further.”

A hearing to approve the disclosure statement related to Garlock’s proposed reorganization plan is set for Jan. 21.

Garlock is a subsidiary of Charlotte, N.C.-based EnPro Industries Inc., 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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