C&EN: TODAY'S HEADLINES - ASBESTOS SNARES TWO MORE FIRMS

MARC REISCH

An ever-widening asbestos claims explosion has forced two companies to kick in millions of dollars to help settle claims against W.R. Grace.

Sealed Air, which bought Grace’s Cryovac food packaging business in 1998 for $1.2 billion, will contribute more than $830 million in cash and stock to a trust to pay claims against Grace. Germany’s Fresenius, which bought Grace’s kidney dialysis unit for $2.5 billion in 1996, will fork over $15 million.

Grace’s troubles stem from a spray-on asbestos fireproofing material it once sold. The firm filed for reorganization under U.S. bankruptcy laws in April 2001 as asbestos claims against it exploded. To bolster the kitty reserved for asbestos claimants as part of the reorganization, a bankruptcy committee working on behalf of claimants sued to recover the value of assets sold to Sealed Air and Fresenius.

The committee succeeded in wrangling a settlement from the two firms by advancing a complex legal argument. They charged that Grace “fraudulently transferred” assets to new owners when it was technically bankrupt because of asbestos claims. A source familiar with the court case involving Sealed Air and Fresenius says, “The judge put intense pressure on the parties to reach a settlement.”

While too late to help companies involved in existing or pending bankruptcy suits, legislation tackling the asbestos monster—which has also affected firms such as Dow Chemical and Eastman Chemical—is likely, according to David T. Austern, general counsel for Claims Resolution Management Corp., a for-profit company that manages toxic tort payouts.

At a recent speech in New York City, Austern said compensation for claimants without serious health impairments could be disallowed and corporate liability—now estimated at $100 billion—could decline if Congress passes the legislation.