Georgia-Pacific's Bestwall Seeks Bankruptcy Protection Over Asbestos Litigation -- Update
November 02 2017 - 5:25PM
Dow Jones News
By Lillian Rizzo
Bestwall LLC, an affiliate of Georgia-Pacific LLC, has sought
bankruptcy protection after years of asbestos-related costs have
piled up.
Bestwall, which once made building products that contained
asbestos, sought chapter 11 protection on Thursday in the U.S.
Bankruptcy Court in Charlotte, N.C.
The bankruptcy filing comes as Bestwall looks to survive an
onslaught of claims for asbestos damage that date back to the
1970s. A part of the bankruptcy code allows companies to set up
trust funds to pay claims, protecting their future operating funds
from potential liabilities.
Nearly 100 companies, including units of Halliburton Co.,
Garlock Sealing Technologies LLC and most recently Kaiser Gypsum
Inc., have sought bankruptcy protection in order resolve asbestos
claims, according to Bestwall data provided to The Wall Street
Journal. As these companies reorganized and funded billions into
asbestos trusts, those like Bestwall were put under the spotlight
and became "subject to sharply higher settlement demands,"
according to Bestwall data.
"Chapter 11 [protection] is the only mechanism available that
provides all stakeholders with the ability to achieve a permanent,
global resolution of asbestos-related claims that is fair and
equitable to Bestwall, as well as present and future claimants,"
the company said in court papers filed Thursday.
While the asbestos litigation dates back nearly 40 years,
Bestwall has decided to seek bankruptcy protection as
litigation-costs have exponentially increased since 2000, according
to data provided by Bestwall representatives. Between 1979 and
1999, the litigation costs averaged about $6 million a year.
However, by 2000 the costs began to spike, and since then have cost
the company about $2.8 billion.
The company has paid most of these expenses out of pocket, with
insurance covering about 30% of the claims until insurance "was
almost entirely exhausted in 2013," court papers show.
The company expects that "it will be a target of asbestos claims
through at least 2050," court papers show.
This summer, Georgia-Pacific Holdings, an Atlanta-based
subsidiary of Koch Industries, reorganized its corporate structure,
separating its Georgia-Pacific unit -- known for consumer products
such as Brawny paper towels and Quilted Northern toilet paper, as
well as building and construction products -- and its Bestwall
unit.
Georgia-Pacific, as well as Bestwall's GP Industrial Plasters
LLC subsidiary, aren't part of the chapter 11 filing. Bestwall
solely contains the asbestos claims, which stem from
asbestos-containing building products in the 1970s.
Georgia-Pacific acquired Bestwall Gypsum in 1965, which made a
compound used in building products. About 12 years later the
company ceased manufacturing the compound, and by 1979 the former
Georgia-Pacific began dealing with asbestos litigation. It has
since faced "hundreds of thousands of asbestos-related lawsuits"
through the present day, court papers show.
There are about 64,000 asbestos-related claims pending against
Bestwall in nearly every state and territory, which includes
roughly 22,000 being actively litigation and approximately 13,000
claims pending on inactive dockets, Bestwall Chief Restructuring
Officer Tyler Woolson said in court papers filed Thursday.
"[Bestwell] expects that thousands of additional claims will be
filed or asserted against it every year for decades to come," Mr.
Woolson said.
According to information provided by Bestwall, the company's
asbestos-containing products represented less than 1% of the total
asbestos-containing products made in the U.S. during the 20th
century. Still, Bestwall and its predecessor have been named as a
defendant in nearly 80% of all cases involving mesothelioma, a
diseases associated with asbestos exposure, in the U.S. each year,
according to the data.
By filing for bankruptcy protection and offering to set up a
trust to pay litigation claims, Bestwall can get out from under the
threat of mass litigation over asbestos damage claims.
Bestwall's analysis indicates that, if the asbestos cases remain
in the courts, the results will be "substantially worse than even
the most conservative projections," Mr. Woolson said in court
papers.
Peg Brickley contributed to this article.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com
(END) Dow Jones Newswires
November 02, 2017 17:10 ET (21:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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