EnPro: Garlock joint plan of reorganization effective as of July 31

By Caroline Salls

Pittsburgh, July 31 – EnPro Industries, Inc. announced that the joint plan of reorganization of its Garlock Sealing Technologies LLC subsidiary took effect on Monday.

According to a news release, the plan resolves the current and future asbestos claims of Garlock and its other EnPro subsidiary Chapter 11 debtors, including Garrison Litigation Management Group, Ltd., Anchor Packing Co. and OldCo, LLC, the successor by merger to Coltec Industries Inc.

The plan was confirmed by the U.S. District Court for the Western District of North Carolina on June 12.

Under the joint plan, EnPro retained ownership of Garlock and OldCo and each of those subsidiaries became free to operate its respective business and use, acquire, and dispose of its respective property free of any restrictions of the Code.

As a result, Garlock and OldCo have been reconsolidated with EnPro for financial reporting purposes as of July 31.

“The consummation of the joint plan represents the successful culmination of many years of dedicated effort to resolve the asbestos burden that has weighed on our company since we were founded in 2002,” EnPro president and chief executive officer Steve Macadam said in the release.

As previously reported, the plan implements the terms of a comprehensive settlement reached in March 2016.

Some technical amendments were made to the plan before the confirmation hearing to resolve objections filed by three insurers, the purchaser of assets of the Quincy Compressor business formerly operated by the Coltec debtor and by the bankruptcy administrator.

None of the amendments affected the amounts or timing of contributions to be made to the asbestos resolution trust to be established by the plan.

Insurance settlements

Garlock also reached several settlements with insurance carriers that issued policies covering losses associated with product liability claims against Coltec and some of its subsidiaries.

These include a settlement related to $62 million of remaining available products hazard limits and insurance receivables, with two carriers agreeing to pay their full remaining policy limits of $18.8 million over a three-year period.

An agreement with another group of carriers calls for the payment of $24 million. EnPro said it expects that the full amount of remaining policy limits and insurance receivables, totaling $19.2 million, in the Garlock coverage block will be received either through settlements or in reimbursement of the company’s plan funding as payments are made by the asbestos trust.

In addition, the company settled with two insurance carriers that issued primary general liability policies before Jan. 1, 1976, allowing the recovery of a portion of $110 million of planned contributions to the asbestos trust. The two carriers will make one-time cash payments of $19 million.

Trust details

According to an 8-K filed with the Securities and Exchange Commission, a trust was established before the plan effective date and was funded with cash contributions by Garlock and Garrison of $350 million, the contribution made by OldCo of $50 million in cash and an option, exercisable one year after the effective date, permitting the trust to purchase for $1 shares of EnPro common stock with a value of $20 million and the obligations of OldCo to make a deferred contribution of $40 million in cash and of Garlock and Garrison to make a total deferred contribution of $20 million in cash no later than one year after the effective date.

EnPro said OldCo will have the right to call its option for payment of $20 million in cash at any time before the one-year anniversary of the plan effective date, and the trust will have the right to put the option to OldCo for payment of $20 million on the first anniversary of the effective date.

The option will terminate on the second anniversary of the plan effective date in return for payment to the trust of $20 million.

The 8-K said the deferred contributions are guaranteed by EnPro and secured by a pledge of 50.1% of the outstanding voting equity interests of Garlock and Garrison.

Plan terms

Under the plan, administrative expense claims will be paid in the ordinary course.

Priority tax claims and priority claims will be paid in full in cash.

Non-tax secured claims will be unaltered or paid in full. Secured tax claims will be paid in full in cash.

Workers’ Compensation claims, Coltec general unsecured claims and intercompany claims will be reinstated.

Holders of Garlock general unsecured claims will be paid in full in cash plus post-bankruptcy interest at the federal judgment rate.

Holders of Anchor Packing Co. claims will receive nothing because Anchor has no significant property and will be liquidated and dissolved.

Garlock/Garrison Litigation Management Group, Ltd. equity interests will be retained. Other debtor equity interests will remain intact.

Garlock is a subsidiary of Charlotte, N.C.-based EnPro Industries, 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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