For Grace, a long road out of bankruptcy court

Columbia chemical maker — and its stock price — grew during nearly 13-year wait

  • The W. R. Grace & Co. manufacturing site in Baltimore, Maryland produces products found in a variety of everyday items, ranging from toothpaste to gasoline to bottles and cans.
The W. R. Grace & Co. manufacturing site in Baltimore, Maryland… (Steve Hane / W. R. Grace &…)
February 01, 2014|By Jamie Smith Hopkins, The Baltimore Sun

Chemical maker W.R. Grace & Co. is about to go where it hasn't been for nearly 13 years: out of bankruptcy.

The Chapter 11 case, one of the longest on record, got underway as the Columbia-based company faced more than 100,000 asbestos-related claims. Now, after negotiations, settlements and numerous appeals, Grace said it is finally on the brink of emerging from court protection — possibly as soon as Monday.

In between, Grace agreed to pay all creditors in full, acquired more than two dozen companies and pushed its stock from $1.52 a share to more than $90.

"This is just an absolutely amazing Chapter 11 case," said Peter A. Chapman, president of Bankruptcy Creditors' Service, which publishes newsletters about corporate restructuring. "Usually equity is wiped out, and claimants and bondholders get paid a fraction … of what they're owed."

Grace officials said they look forward to once again doing the sorts of things normal publicly traded firms can do — like return cash to shareholders. The case has dragged on so long, it predates CEO Fred Festa's tenure at Grace by 21/2 years.

"There will be some who will say that nothing changes when we emerge from bankruptcy," said Rich Badmington, a Grace spokesman. "I can't help but think that people will think of us differently."

People with asbestos claims — including pipe fitters, construction workers and others who said they were sickened after exposure to Grace products — are eager to see the company emerge, too. They've had to wait all this time to get paid.

"It's been a long, hard slog, and it's gratifying that we appear to be at the end of the road," said Peter Lockwood, one of the attorneys representing a personal-injury claimants' committee in the Grace case.

Scott Baena, bankruptcy counsel for the official property damage claimants' committee in the Grace case, can't believe that it's just now about to happen — 11 years after a key asbestos settlement in the case.

"This has taken too long," he said.

Grace — which employs nearly 1,100 people in Maryland — makes specialty chemicals and materials across the globe. Products range from coatings that keep soda from tasting like the can to catalysts used in refining oil and shale gas.

But the 160-year-old company was once a classic conglomerate with fingers in many more pies. It established a bank. Ran a Grace line of passenger ships. Launched an airline. Owned hundreds of restaurants. Sold fire-protection products. Acquired Zonolite, a company that sold insulation made with vermiculite.

The Zonolite acquisition is what got Grace into financial trouble later. A naturally occurring, particularly toxic asbestos was laced through the company's vermiculite mine. Grace also added asbestos to some of its fire-protection products before the Environmental Protection Agency banned the practice in 1973.

Asbestos fibers can be lethal, damaging lungs and causing certain cancers. Grace followed competitors into bankruptcy protection after claims against it spiked in 2000, largely related to the fire-protection products.

The vermiculite problem engulfed an entire town.

Zonolite had a mine and mill just outside the small community of Libby, Mont. Grace, which acquired the company in 1963 and ran the Libby operation until 1990, said it wasn't aware of the "extent of hazards" when it bought in.

Between the vermiculite dust that traveled off the site and materials from the mine used in town, contaminants spread everywhere — homes, businesses, school ball fields. Hundreds of people, including some who never worked for Grace, fell sick. Residents died of asbestosis, a chronic lung disease, and cancers such as mesothelioma.

A series of newspaper articles brought attention to the problem. The Seattle Post-Intelligencer reported in 1999 that asbestos was killing Libby's residents and that Grace had done nothing to stop it despite knowing of the problem since the beginning of its ownership there.

The EPA sent a team to investigate, then initiated a major cleanup. Sen. Max Baucus of Montana declared it "the worst public health disaster in U.S. history." The federal government pursued criminal charges against the company and former executives — a case resolved in 2009 when the parties were acquitted of knowingly endangering Libby residents.

Grace, which agreed to contribute $250 million to cleanup efforts in a settlement with the EPA and the Justice Department, maintained that it behaved responsibly. It said it spent millions on medical care for Libby residents.

But in Libby, Grace remains persona non grata.

"It was just wrong what they did," said Doug Roll, the town's mayor, who so far has limited damage to his lungs and hopes it stays that way.

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