Analysis: Why bankrupt W.R. Grace is thriving

Sun Jun 16, 2013 5:12pm EDT
 
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By Ernest Scheyder and Nick Brown

COLUMBIA, Md./NEW YORK (Reuters) - A company stuck in bankruptcy for 12 years may not seem like much of a catch, but investors have fallen in love with U.S. specialty chemical manufacturer W.R. Grace & Co GRA.N and its surging sales to the energy sector.

One of the longest bankruptcies in U.S. history, Grace filed for Chapter 11 protection in 2001 after an asbestos leak at one of its mines led to thousands of lawsuits against the company.

Through bankruptcy, Grace was able to pause debt repayments, survive two recessions and take advantage of a U.S. shale energy revolution that is fueling demand for its fine-powder catalysts, which help refiners process crude oil into gasoline, heating oil and other products.

The company's stock has more than tripled in the past three years and counts 46 hedge funds among investors as of March 31.

"Bankruptcy has been a great place to hide out," said Scott Baena, an attorney who helped negotiate the settlements on behalf of property damage claimants. "It has for all intents and purposes been business as usual."

Grace closed its mine in Libby, Montana, in 1990 after discovering the process it used to extract vermiculite - a mineral used in commercial insulation - caused the release of asbestos. More than 400 residents died from asbestos exposure.

Early in the case, plaintiffs claimed Grace's personal injury liability topped $7 billion, 14 times what the company had estimated, said Peter Lockwood, a lawyer for a committee of Grace's personal injury claimants.

Had the matter gone to trial and the plaintiffs prevailed, it may have crippled Grace.   Continued...

 
A new building is under construction at chemical maker W.R. Grace's Maryland headquarters in Columbia, Maryland on June 6, 2013. REUTERS/Ernest Scheyder