W.R. Grace asbestos committees object to exclusivity extension

By Reshmi Basu

New York, July 6 - W.R. Grace & Co., Inc.'s official committee of asbestos personal injury claimants, the official committee of asbestos property damage claimants and the legal representative for future asbestos personal injury claimants objected to the company's request for a tenth extension to its exclusive periods to file a reorganization plan and solicit votes on the plan, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The asbestos constituents said the request should be denied because W.R. Grace has failed to engage in meaningful discussions to resolve differences in opinions. In addition, the constituents "are being held hostage to the reorganization process," they said in the motion.

The constituents added they believe that an extension to the exclusivity period would only delay the reorganization process to 2009 or 2010.

"It is clear that the debtors have no real incentive to reach a consensual agreement with the asbestos constituents before there is a decision in the PI (personal injury) estimation trial," the constituents argued.

As reported earlier, the estimation trial originally was scheduled for June but has been pushed back to a starting date of Jan. 14, 2008.

The constituents also contended in the motion that W.R. Grace has prospered as a result of the bankruptcy case, noting that the company has bought and sold business components, granted rich compensation and benefit packages and accumulated so much cash that it has not had to borrow from its debtor-in-possession credit facilities.

"And during this time, asbestos claimants have been unable to prosecute their claims against the debtors because of the automatic stay. This, of course, is in stark contrast to general unsecured creditors and shareholders who have regularly traded their claims and shares in robust markets," the constituents noted in the motion.

The constituents are asking the court to deny W.R. Grace's request for an exclusivity extension. They also have proposed that the court set a short briefing schedule to determine if the company's existing plan can be confirmed by a matter of law, which potentially could jumpstart negotiations between the parties.

Under the proposed briefing schedule:

• The debtors would submit an opening brief on Aug. 13;

• The constituents would submit response briefs on Sept. 4; and

• The debtors' reply brief would be due on Sept. 11.

After the briefing period, the bankruptcy court would hear arguments and rule on whether the plan is confirmable during the Oct. 22 omnibus hearing.

The constituents said the proposal would speed up the process because the court can rule immediately on the confirmation and resolution of asbestos claims, following the estimation results from the personal injury trials, which are set to be released at the earliest by the middle of 2008.

"Under the debtors' approach, their unconfirmable plan will simply remain on file ... The debtors are hoping with this purposeful delaying strategy, that the hostages will capitulate and agree to a debtor plan that pays them a fraction of what they are owed," the asbestos constituents stated in the motion.

As previously reported, the company asked the court to extend the exclusive plan-filing deadline to 90 days after a final order is entered in its personal injury claims estimation trial. The company also asked the court to extend the solicitation period to 60 days after the plan filing deadline.

W.R. Grace's exclusivity is set to expire on July 23. A hearing on the exclusivity extension also is scheduled for July 23.

W.R. Grace, a Columbia, Md.-based specialty chemicals company, filed for bankruptcy on April 2, 2001. Its Chapter 11 case number is 01-01139.

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