W.R. Grace looks to contribute $236 million to retirement plans

By Caroline Salls

Pittsburgh, Feb. 18 - W.R. Grace & Co. requested court approval to make roughly $236 million in contributions to the Grace Retirement Plans in 2011, according to a Feb. 18 filing with the U.S. Bankruptcy Court for the District of Delaware.

The company said it is asking the court to authorize but not require it to make the contributions.

According to the motion, the proposed contribution is made up of the remaining $55.8 million minimum pension contribution the company is required by statute to make in four payments between April 2011 and January 2012 and an additional contribution of up to $180 million.

Grace said it will save up to $82.4 million in cash by making the additional contribution now rather than in installments through 2017.

Specifically, the company said the additional contribution will allow it to generate $56 million in cash tax savings in 2011, reduce estimated cash pension contributions by roughly $26.4 million over the period of 2011 to 2017 and reduce projected pension expenses by a similar amount.

In addition, Grace said making the additional contribution now would let it generate an up to 21% internal rate of return based on cash savings of up to $82.4 million, reduce unfunded pension liabilities to $133 million from $367 million this year and reduce volatility in future pension benefit obligations and associated required cash pension contributions and expenses.

The early contribution will also allow the company to create a "pre-funding" credit that will help it better manage its annual free cash flow during the years directly following its emergence from bankruptcy and further optimize the reorganized company's capital structure at exit and in the years following by exchanging highly volatile unfunded pension benefit obligations for a fixed amount of debt at a contractual interest rate.

W.R. Grace said it plans to frontload the 2011 contribution by making the entire additional contribution and $13 million statutory minimum contribution by March 31, for a total of $193 million.

The company will pay the balance in three contributions, including a $13.2 million contribution in July, a $16.3 million contribution in September 2011 and a $13.2 million contribution in October 2011.

A hearing is scheduled for March 28.

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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