W.R. Grace & Co., the Columbia chemical maker in bankruptcy protection since 2001, lost exclusive rights to file its reorganization plan after a federal judge ruled against the company yesterday.
Judge Judith K. Fitzgerald of the U.S. Bankruptcy Court in Wilmington, Del., denied Grace's 10th request for exclusive rights to file its reorganization plan. The move, which is unusual in bankruptcy proceedings, means any creditor may file a competing reorganization plan.
Grace filed for Chapter 11 bankruptcy in April 2001 to protect itself from 135,000 asbestos claims spanning several decades. Company executives argued that creditors should be barred from filing reorganization plans, saying asbestos claimants did not follow the judge's rules about turning over evidence in advance of a January trial. Grace asked for exclusivity until all appeals are completed from the trial to estimate its asbestos liability.
"Debtors have failed to establish that extending exclusivity will result in advancing the case towards resolution," Fitzgerald wrote in her order, saying that ending those limits should move "the case toward conclusion." She added the company has "had sufficient exclusive time to control negotiations with creditors and to confirm a feasible plan."
Both the asbestos creditors and the U.S. trustee in Delaware opposed Grace's request to keep handling the reorganization plan alone.
"They have had enough time to come up with a plan and have continually insisted on more time," said Charles Stein Siegel, attorney for the asbestos claimants. "Their right to exclusively propose is not worth much anymore."
With judicial approval, Grace could have retained exclusivity indefinitely because its Chapter 11 filing occurred before U.S. bankruptcy law changed in October 2005.
The new law prohibits bankruptcy courts from allowing a company more than 18 months of exclusivity.
"Grace is disappointed in the ruling," said Bill Corcoran, vice president of public and regulatory affairs for Grace, in a prepared statement, "but was happy to see Judge Fitzgerald reaffirm her commitment to the estimation process and endorse the way the company is being run."
Bankruptcy experts said the decision shows the court was getting impatient that Grace had not filed a reorganization plan.
They added it is likely to push Grace toward resolving the issue so that it can avoid a creditor's reorganization plan. Creditors typically vote on a reorganization plan and a judge must approve it.
"They're losing control over the bankruptcy process," said Lawrence D. Coppel, head of the bankruptcy and restructuring practice at the Baltimore law firm of Gordon, Feinblatt, Rothman, Hoffberger & Hollander. "It's pressuring the company to make some kind of movement."
Mark A. Peterson, a research scientist at the Rand Corp. who was hired by attorneys suing Grace to estimate the amount the company may need to spend to resolve the cases, said the cost could range from $4.7 billion to $6.2 billion.
But Analysis Research Planning Corp., a Washington consulting firm hired by Grace, put the value of pending and future claims in the range of between $385 million and $1.3 billion through 2049.
Grace shares fell $1.31, or 6 percent, to close at $20.16 on the New York Stock Exchange yesterday.
stephanie.newton@baltsun.com
Bloomberg News contributed to this article.