RPM International Inc. said it has taken actions to permanently resolve current and future asbestos claims associated with its Bondex International Inc. subsidiary with the filing of Chapter 11 reorganization proceedings for Bondex and Specialty Products Holding Corp.
Bondex and Specialty Products Holding Corp., described as non-operating RPM subsidiaries, have filed Chapter 11 reorganization proceedings in Delaware, RPM said. RPM and all of its operating subsidiaries are not part of the Chapter 11 filing and will not be affected by it, the company said.
RPM said the filings will stay all litigation related to asbestos personal-injury lawsuits against Bondex and Specialty Products. As a result, RPM said it anticipates that its annual consolidated cash flow will improve by approximately $50 million.
Specialty Products is the holding company for Bondex, and also functions as the holding company for various operating companies that are not part of the reorganization filing. The operating companies include Chemical Specialties Manufacturing Corp., Day-Glo Color Corp., Dryvit Systems Inc., Guardian Protective Products Inc., Kop-Coat Inc., RPM Wood Finishes Group Inc., and TCI Inc. All those companies “will continue to operate as usual and without interruption,” RPM said.
RPM said the Chapter 11 proceedings will enable Specialty Products and Bondex to establish a section 524(g) trust accompanied by a court order that will direct all future Bondex-related claims to the trust, “which will then compensate only meritorious claims at appropriate values.” Because the Bondex asbestos liability is confined to two subsidiaries, asbestos recoveries will be limited to some portion of the value of the affected entities, the company said.
Specialty Products has secured a commitment for $40 million in new “debtor-in-possession” financing from a lender group led by Wells Fargo Capital Finance LLC, RPM said, adding that the financing “will provide SPHC with the financial resources to fund the costs of the Chapter 11 proceeding.”
With fiscal 2009 revenues of $329 million and $19 million in pre-tax income, Specialty Products and its subsidiaries represented less than 10% of RPM’s consolidated revenues and less than 11% of its consolidated pre-tax income for fiscal 2009.
As a result of the filing, the financial results of Specialty Products and its subsidiaries will not be consolidated with those of RPM and its other subsidiaries. During the period of reorganization, beginning on May 31, Specialty Products and its subsidiaries will be presented in RPM’s financial statements as an investment using the cost method. Since the asbestos liabilities reside with Bondex, its asbestos-liability reserves will no longer be reflected on RPM’s consolidated financial statements as of May 31.
“This action has been taken to once and for all resolve the asbestos-related Bondex legacy liability,” said RPM Chairman and CEO Frank C. Sullivan. “These filings bring an immediate halt to all tort system costs associated with the Bondex asbestos liabilities, and enable the filing entities to utilize section 524(g) and other provisions of the U.S. Bankruptcy Code to achieve a permanent and comprehensive resolution of asbestos-related liability.”