Banks may upset w.r. grace plans to exit bankruptcy

June 17, 2008 â€" W.R. Grace & Company has plans to exit bankruptcy in 2009, but bank demands for approximately $100 million in interest payments may cause problems for the company. Paying the interest may upset an important deal with some of W.R. Grace & Company’s many asbestos creditors, and delay the company’s bankruptcy still further. The banks which are demanding the money have around $500 million out on loan to W.R. Grace & Company, and are demanding that the company pay interest at default rates. That, says W.R. Grace, is jeopardizing the company’s settlement with asbestos creditors and may even prevent the company exiting Chapter 11 bankruptcy status in 2009. The company highlighted the issue in papers it filed with the U.S. Bankruptcy Court in Wilmington, Delaware on Friday. According to the papers, W.R Grace & Company is, after many years of bankruptcy and litigation, “poised to proceed with the proposed asbestos settlement and emerge from Chapter 11.” However, the papers say, “The lenders’ most recent demand…threatens to derail that process.” The banks, says W.R Grace, have labeled the company’s Chapter 11 proposal as “unconfirmable” because. The banks believe that the proposal short-changes them because it fails to give them the default interest rate on the loans. With $500 million in loans at stake, the difference in interest rates means the banks believe they are ‘missing out’ on a substantial amount of money. W.R Grace & Company wants presiding bankruptcy Judge Judith Fitzgerald to decide whether the banks are entitled to the default interest rate as quickly as possible, because until the decision on the interest rate is made, the company doesn’t know whether it can make good on the asbestos deal it hopes to confirm. That deal is the basis for the company’s plan to exit bankruptcy. This highlights the fact that the W.R Grace & Company isn’t the only entity waiting for this decision: thousands of asbestos creditorsâ€"including people who have developed asbestos-related diseases as a result of asbestos exposure the company is responsible forâ€"are waiting too. The request for the extra interest was made back in April, when J.P. Morgan Chase & Co. made the request on behalf of itself and other members of the group which holds the company’s bank debt. If the banks win the ruling, W.R. Grace warns, the trial which was stopped in favor of a settlement will start up again, because the outcome of the trial determines whether the company has enough value to cover its debts and liabilities. (Source: Asbestos and Mesothelioma News)