Circor unit Leslie Controls files bankruptcy to resolve asbestos claims

By Caroline Salls

Pittsburgh, July 12 - Circor International, Inc. subsidiary Leslie Controls, Inc. made a pre-packaged Chapter 11 bankruptcy filing July 12 in the U.S. Bankruptcy Court for the District of Delaware to resolve Leslie's asbestos liability, according to a company news release.

Circor said Leslie's pre-negotiated plan of reorganization is supported by a committee of attorneys representing current asbestos claimants and a proposed independent representative of future claimants.

The plan is designed to permanently resolve Leslie's asbestos liability through the creation of a trust under Section 524(g) of the Bankruptcy Code.

All current and future asbestos claims against Leslie would be channeled to the trust for review and payment, providing both Leslie and Circor with permanent court protection from such claims.

"Because we strongly believe that exposure to Leslie's products has not caused any asbestos-related illness, our strategy has been to vigorously defend these claims," Circor chairman and chief executive officer Bill Higgins said in the release.

"However, the cost of this defense has exceeded the profits generated by Leslie's operations, and we have been considering for some time a range of strategic alternatives that would enable us to permanently eliminate this expense and risk.

"Resolving Leslie's asbestos liability through a pre-negotiated plan of reorganization accomplishes that aim, while preserving the value of a strong and viable business.

"Unencumbered by financial and legal exposure to asbestos liability, Leslie will be positioned to grow and contribute to Circor's profitability and cash flow going forward."

Circor said Leslie plans to conduct business as usual during the Chapter 11 process, which could be completed in 120 days. Leslie expects the formal process of soliciting votes for the plan to begin within 30 to 45 days and to be completed in 60 to 90 days.

DIP financing

Because the bankruptcy filing stays all pending and future asbestos litigation against Leslie, the company said the subsidiary's cash from operations is expected to be enough to satisfy all operating costs.

However, Circor has agreed to lend up to $10 million of debtor-in-possession financing to Leslie if needed.

The company is seeking interim access to $2 million of the financing.

Interest on the revolving facility will be Libor plus 350 basis points.

The loan will mature on the earlier of Nov. 15 and the effective date of the company's plan.

Plan terms

Under the pre-negotiated plan, funding for the 524(g) trust will consist of a $75 million contribution by Leslie and Circor together with a contribution of proceeds from Leslie's remaining asbestos insurance assets.

Leslie will still be a subsidiary of Circor during and after Chapter 11.

Treatment of creditors will include:

• Secured claims will be reinstated;

• Holders of general unsecured claims will have their claims reinstated, and Leslie will pay any required amounts in full;

• Asbestos personal injury claims will be channeled to the trust; and

• Holders of Leslie equity interests will retain those interests, which will become reorganized Leslie common stock. The common stock will be transferred to the asbestos trust until a related promissory note is paid in full.

Asbestos claim history

According to the release, Leslie has been named in an escalating number of asbestos-related personal injury claims since 2002.

Circor said these claims relate primarily to the use of asbestos on U.S. Navy ships from the 1940s to the 1980s.

However, the company said Leslie strongly believes that exposure to its products has not caused any asbestos-related illnesses.

Debt details

According to court documents, Leslie has $10 million to $50 million in assets and $50 million to $100 million in debt.

The company did not list any unsecured creditors with claims of $1 million or more.

Burlington, Mass.-based Circor designs, manufactures and distributes fluid-control products and services. Leslie's Chapter 11 case number is 10-12199.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.