US RPM subsidiary reaches deal to settle bankruptcy, asbestos claims

28 July 2014 17:36 Source:ICIS News

HOUSTON (ICIS)--An agreement in principal has been reached, which will settle the multi-year bankruptcy and asbestos claims for Bondex and related units through a trust opened with an initial payment of $450m, parent company RPM International said on Monday.

RPM subsidiaries Bondex and Specialty Products Holding Corp (SPHC) filed for chapter 11 bankruptcy protection in June 2010. A bankruptcy court in May 2013 had estimated the two business units owed about $1.17bn in asbestos claims, but the businesses had planned to appeal that amount.

Under the agreement in principle with representatives of current and future asbestos claimants, a $450m payment would establish the trust. Additional payments would be due on the second, third and fourth anniversaries of the trust, bringing the contribution total to $797.5m, according to a statement by RPM.

The company said that due to the payments being tax deductible, the after-tax effect of the contributions would be $485m.

“We have been able to reach a settlement on acceptable terms that will resolve the Bondex-related asbestos liability, while enabling us to reconsolidate the financial results of SPHC's growing and profitable businesses,” RPM CEO Frank Sullivan said in a statement.

On a conference call for RPM’s fiscal Q4 results, Sullivan said that RPM estimates it will take six to nine months to go from the agreement to a final plan, which would need to be approved by a claimant vote, the bankruptcy court and a district court.

“So I think we’re about 90% of the way there,” he said.

Although he said the company still views the amount as high, Sullivan said that the agreement allows certainty on the final cost of the Bondex litigation and will allow RPM to fully use its cash flow for accelerated growth and more aggressively returning capital to shareholders.

“We could not be more excited to complete this transaction in a manner that brings great companies with great brands and great people and a great strategic fit back into the RPM family,” Sullivan said.

By Jessie Waldheim