While Sealed Air Corp. has reached an agreement to settle a thorny asbestos case involving its Cryovac Inc. specialty films division, the long-term impact on similar cases is uncertain.
Sealed Air of Saddle Brook, N.J., agreed in principle Nov. 29 to a cash and stock payment to wipe away present and future asbestos claims and avoid going to trial in a lingering fraudulent-transfer case.
That case, filed in Wilmington, Del., was brought by creditors of W.R. Grace & Co. of Columbia, Md. Sealed Air bought Cryovoc in 1998 from the financially beleaguered Grace, which now is under Chapter 11 bankruptcy protection. The specialty chemicals firm had been the target of more than 325,000 asbestos personal-injury claims before the bankruptcy filing.
Grace creditors alleged the Cryovac deal was suspect because Grace sold the company for less than the value of those mounting claims. In addition, they argued that Sealed Air should have known that Grace was insolvent at the time of the deal, alleging that Grace sold the company to try to unburden itself from future asbestos payouts.
While Sealed Air President and Chief Executive Officer William Hickey held an angry Aug. 1 analyst call to argue that Cryovac was purchased in good faith, the company decided to settle instead of taking the case to trial.
``It brings the finality and certainty that we were seeking all along,'' said Sealed Air spokesman Philip Cook. ``The Grace asbestos-related issues are behind us.''
Sealed Air will pay about $853 million to a Grace-established trust to pay asbestos claimants. The contribution includes $512.5 million in cash and interest payments and 9 million shares of Sealed Air common stock.
The need for a settlement might have been cemented by a July 29 legal opinion from Judge Alfred Wolin, who argued for many of the plaintiff's points. Still, Cook said Sealed Air was confident in its case and officials considered proceeding to trial.
``Given what the negotiations were, it was best for us and our shareholders to resolve this,'' he said.
Shareholders apparently agreed, if publicly held Sealed Air's stock price is an indication. Traded over the New York Stock Exchange, the stock has risen close to 50 percent since the agreement was announced, inching back to the level it held before the judge's ruling in late July.
Several other firms involved in fraudulent-transfer asbestos cases have been watching the events closely, including Toledo, Ohio-based Owens Corning, which has issues surrounding its 1997 acquisition of Fibreboard Corp.
In that case, some OC creditors say asbestos-hampered Fibreboard, a vinyl-siding maker, was insolvent before the purchase. How that case plays out is anyone's guess, said OC spokesman Stephen Krull. Fibreboard has been integrated into OC and cannot be returned readily, he said.
Owens Corning filed for Chapter 11 bankruptcy protection in October 2000. It hopes to resolve the Fibreboard issue as part of its reorganization plan, due Jan. 10 at U.S. Bankruptcy Court in Wilmington, Krull said. Creditors would have to agree to the plan, he said.
The Sealed Air settlement, while of major interest, has not affected Owens Corning's case, he said.
Some analysts have said Sealed Air's resolution could thwart future fraudulent-transfer litigation by capping the amount of liability awarded. Some investment firms had speculated that Sealed Air could have been seriously damaged by the case or could have lost Cryovac, but the agreement represents a small piece of Sealed Air's $3.07 billion in fiscal 2001 sales.
Yet, the issue remains open at Owens Corning, Krull said. ``That case had different dynamics and its own unique issues. We're working exactly the same way we had before the Sealed Air settlement.''