Garlock Sealing Technologies LLC, a maker of industrial gaskets and sealing systems, filed for Chapter 11 protection Saturday in North Carolina along with two affiliates in order to get a handle on its asbestos-related personal injury claims.
A wholly owned subsidiary of publicly traded industrial products maker EnPro Industries Inc. (NPO), Garlock said its primary operations are not in distress but the company has been “overwhelmed” by more than 900,000 asbestos-related claims.
“Without Chapter 11 protection, the value of [Garlock's] core businesses and … ability to compete effectively in the marketplace will be irrevocably damaged,” Chief Financial Officer Donald G. Pomeroy said in papers filed with the U.S. Bankruptcy Court in Charlotte, N.C.
Garlock, based in Palmyra, N.Y., listed assets between $500 million and $1 billion and debts between $100 million and $500 million, on its Chapter 11 petition. Parent EnPro Industries, based in Charlotte, is not included in the bankruptcy case.
Pomeroy said the Chapter 11 filing will create a “single forum” under which Garlock can deal with its asbestos claims.
“Under a process that guarantees integrity through application of the rules of evidence and the rule of law, Garlock has sufficient insurance and other assets to fund a post-confirmation trust that will pay asbestos claims in full,” he said.
The company said it expects to file a Chapter 11 plan that will pay back all creditors in full.
Garlock and affiliates have already paid $1.4 billion in settlements and judgments in addition to spending $400 million on asbestos-related legal bills. The company says that despite those efforts it still has about 100,000 pending claims.
Until 2000, Garlock and its affiliates manufactured gaskets, pipe joints, valves and other equipment that contained “trace” amounts of asbestos.
The company believed it could avoid the problems that dragged several other manufactures of asbestos-containing products into bankruptcy protection because the items it produced did not easily break apart, and therefore were unlikely to contribute to asbestos-related diseases, Garlock said.
But the company continued to face claims from plaintiffs who said their injuries were caused by exposure to Garlock products and not from other more friable goods whose manufactures had already created asbestos trusts.
Garlock said it had about $194 million in available insurance coverage.
“The continued cost of resolving asbestos claims unfairly targeted against Garlock at values improperly inflated by bankruptcies of culpable producers of friable asbestos products threatens Garlock’s core business,” Pomeroy said.
Garlock will seek permission at a Tuesday court hearing to tap a $10 million bankruptcy loan from Bank of America (BAC). The company said the loan is necessary to ensure it has sufficient cash to run its business while in bankruptcy.
Founded in 1887, Garlock employs about 600 workers, primarily at manufacturing plants in Palmyra and Houston.
Last year, the company recorded global sales of $113 million. Garlock’s foreign subsidiaries in Canada, Mexico and Australia were not included in the bankruptcy filing.
The case, 10-31607, has been assigned to Judge J. Craig Whitley. The law firm Rayburn Cooper & Durham P.A. is representing the company.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection)
Source: Wall Street Journal