Garlock Sealing files plan of reorganization and disclosure statement

By Jim Witters

Wilmington, Del., Nov. 29 - Garlock Sealing Technologies LLC filed a plan of reorganization and its associated disclosure statement Monday with the U.S. Bankruptcy Court for the Western District of North Carolina.

Garlock Sealing and its debtor affiliates are wholly owned subsidiaries of Coltec Industries, Inc.

"The debtors have property that substantially exceeds the costs necessary to resolve and pay in full" the asbestos claims and retention by Coltec of equity interests in the reorganized companies, according to the disclosure statement.

No hearing has been scheduled to consider the disclosure statement or the reorganization plan.

The Anchor Packing Co. subsidiary "is a dormant entity that has not had any property or paid any asbestos-related claims in many years," the documents state. The plan of reorganization provides for dissolution and liquidation of Anchor, with no distribution to creditors.

The reorganized company will create a post-confirmation trust, the GST Asbestos Trust, to assume and pay allowed asbestos claims, court documents state.

Claimants suffering from pleural mesothelioma may select either an individual review or an expedited review. The individual review requires detailed medical information. Expedited reviews require less information, court documents state.

Individual reviews may result in settlement offers up to $2.5 million, the documents state.

"It is anticipated, however, that most claimants, by electing expedited review, will receive higher settlement offers than by electing individual review," according to the disclosure statement.

Treatment of creditors

The plan of reorganization includes treatment of creditors as follows:

• Holders of priority claims, secured tax claims and general unsecured claims will be paid in full in cash;

• Holders of secured claims will receive the amount of their claims by either retaining their security, accepting a return of the collateral, accepting the proceeds from the sale of the collateral, accepting a cash payment, accepting continued payment under existing agreements or negotiating other terms;

• Holders of Garlock asbestos convenience class claims will receive $1,000 cash payments;

• Holders of current Garlock asbestos claims will be paid in full in cash;

• All allowed future Garlock asbestos claims will be paid in full in cash;

• Holders of inactive Garlock asbestos claims will receive from the GST Asbestos Trust a medical monitoring distribution and will retain the right to the same treatment as future asbestos claims, should the holder be diagnosed with asbestos-caused cancer;

• Holders of Anchor claims will receive nothing;

• Intercompany claims will be considered satisfied on the plan effective date; and

• Coltec will retain its 100% equity interests in the reorganized companies, with 51% of the voting stock of each reorganized company pledged to secure future funding commitments to the GST Asbestos Trust.

Coltec will provide $30 million to the reorganized companies on the plan effective date to satisfy allowed current asbestos claims. The reorganized Garlock Sealing will transfer $60 million to the trust and commit to future cash payments of $140 million to the trust.

The debtors estimated the value of the business as a going concern was $275 million to $325 million as of Oct. 31. The companies held cash and cash equivalents of about $105 million as of Oct. 31, according to the disclosure statement.

Garlock is a subsidiary of Charlotte, N.C.-based EnPro Industries, Inc., which makes sealing products, bearings, compressors and engines. Garlock filed for bankruptcy on June 5, 2010, and its Chapter 11 case number is 10-31607.

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