USG Considers Filing for Chapter 11 As Costs From Asbestos Claims Grow
A WSJ.COM News Roundup
CHICAGO -- USG Corp. said it is considering filing for bankruptcy protection as costs from asbestos-related claims continue to mount.
As Asbestos Claims Continue to Grow, Broker of Settlements Reduces Its Role (Feb. 7)
USG Takes Charge of $557 Million to Cover Costs of Asbestos Claims (Jan. 12)
The building-materials company's subsidiary, U.S. Gypsum Company, along with many other building-materials companies, used asbestos in their products for decades. It was eliminated from use in compounds for interior wall construction years ago after it was discovered to cause serious and irreversible lung damage.
"In light of significantly increased settlement demands in asbestos lawsuits and the current political environment, including recent changes in the Senate, the company is considering additional strategic alternatives," USG said. "Those alternatives include a new secured bank financing that would provide it with greater long-term liquidity and a possible voluntary restructuring under Chapter 11 of the U.S. bankruptcy code."
Since the beginning of 2000, seven companies that were defendants in asbestos lawsuits -- including Armstrong Holdings Inc. and Owens Corning -- have filed for bankruptcy, and further litigation against those companies has been stayed. In response, plaintiffs' lawyers have sharply increased their settlement demands on other defendants, including U.S. Gypsum, USG said.
"We have said repeatedly that that we cannot shoulder the liability of other companies, but because of the bankruptcies of other defendants, that is what many plaintiffs' lawyers are seeking," William C. Foote, USG's chairman and chief executive, said in a prepared statement.
The subsidiary's asbestos personal-injury costs, excluding insurance recoveries, have risen from $100 million in 1999 to $162 million in 2000 and were estimated to be $275 million this year, USG said.
"We are making progress on the legislative front, but the process is not moving as quickly as we hoped," Mr. Foote said. "At the same time, settlement demands have increased dramatically, to the point that they are completely out of proportion to our legitimate liability."
USG shares fell sharply last week after U.S. Sen. James M. Jeffords said that he would defect from the Republican Party, a move analysts said would hurt USG's chances at solving its asbestos problems politically. Democrats are generally viewed as less sympathetic to the business world's calls for tort reform.
In January, USG said it would take year-end, after-tax charges of $557 million, largely to cover the costs of settling the asbestos claims and their related legal expenses through 2003.
At the time, USG estimated it would have to pay $889 million to $1.28 billion in asbestos-related charges over the next three years. To cover the claims, the company will have reserves of $1.185 billion. |
