Eleven Years in Chapter 11

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Contributed by Adam Strochak

W.R. Grace & Company, the construction products and special chemicals manufacturer, filed for chapter 11 in April 2001 to resolve its asbestos liabilities.  Grace is the only large-cap debtor we have been able to identify whose common shares were not de-listed after filing and continued to trade publicly on a national exchange (the New York Stock Exchange) through its entire chapter 11 case.

Grace’s bankruptcy finally is reaching its conclusion.  The United States Bankruptcy Court for the District of Delaware confirmed Grace’s plan of reorganization in January 2011 and the District Court affirmed a year later in January 2012.  In a July 23, 2012 Memorandum, the District Court denied a property damage claimant’s motion for relief from the earlier order affirming confirmation of the plan.  Further appeals are pending before the United States Court of Appeals for the Third Circuit, but Grace announced in its most recent 10-Q that it is looking for a way to go effective with its plan and emerge from bankruptcy notwithstanding the Third Circuit appeals.

Although it took 11 years, the Grace bankruptcy will result in payment of creditors in full, preservation of equity value, and set aside of funds in various trusts for resolution of asbestos personal injury and property damage claims.  Much ink has been spilled in judicial opinions and commentary on the Grace case, and many will point to the company’s 11 years in chapter 11 as evidence of the need for reform of the bankruptcy laws to expedite the chapter 11 process.  Indeed, the Grace case was already more than four years old when the 2005 amendments to the Bankruptcy Code limited the exclusive period for chapter 11 debtors to propose a plan to 18 months, one of several changes intended to expedite the chapter 11 process.

We’ll leave further commentary on the success or failure of the Grace case, and its duration, for another day.  We would be interested, however, in hearing about any other companies whose common equity continued to trade on a national exchange through a chapter 11 case.  We are aware of only one other example.  Shopping mall owner General Growth Properties, Inc. filed for chapter 11 during the financial crisis in April 2009 and succeeded in having its common shares relisted on the Big Board in March 2010, well before confirmation of its plan in the fall of that year.  If you know of other examples, please send us an email by clicking through this link.