Georgia-Pacific's Bestwall Seeks Bankruptcy Protection Over Asbestos Litigation -- Update

By Lillian Rizzo Features Dow Jones Newswires

Bestwall LLC, an affiliate of Georgia-Pacific LLC, has sought bankruptcy protection after years of asbestos-related costs have piled up.

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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.

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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.

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)