While the most recent spate of bankruptcy filings by asbestos companies began chronologically with Johns-Manville in 1982, followed by Pittsburgh Corning in 1999, and more recently with Babcock & Wilcox shortly thereafter. The reason for this is that Pittsburgh Corning was expected to file — the company was facing a mountain of asbestos cancer claims and had simply run out of resources to deal with them — whereas B&W was a healthy company with more than a billion dollars in remaining insurance coverage.
Since then, the following major manufacturers have filed for bankruptcy protection:
- Owens-Corning
- W.R. Grace
- GAF Ruberoid
- Federal Mogul (which encompasses Turner & Newall and Flexitallic, a gasket company)
- Armstrong World Industries
- Harbison-Walker Refractories
- North American Refractories
A host of less well known entities have also filed for bankruptcy.
Asbestos Cancer Companies Usually Solvent
For the most part, the above list consists of healthy, profitable and financially stable companies with at least some insurance coverage. They are continuing to operate profitably. This appears to be a part of a new and disturbing strategy pioneered by corporate bankruptcy lawyers to aggressively avoid the responsibility of compensating asbestos exposure and cancer claimants, including those with mesothelioma, through the bankruptcy system, even though these companies are not really insolvent.
Bankruptcy Allows Companies to Raise Cash
The other factor driving these bankruptcies is Wall Street. When Owens-Corning filed for bankruptcy, even after their National Settlement Program (known simply as the "NSP") had disposed of thousands of asbestos exposure and cancer cases, it convinced the investment community that any asbestos company was an extremely bad risk, either to loan money to by buying bonds or to invest in by buying shares.
However, if you are an asbestos company, creditors are much more likely to loan you money if you seek "debtor in possession financing" from them. As ordered by the Bankruptcy Court, money loaned on this basis is paid off ahead of all the other creditors. This is to enable companies to keep operating while they are under bankruptcy protection, and has the perverse effect of forcing otherwise functioning concerns to file — it is the only way they can raise cash in the capital markets.
Different Asbestos Claims, Different Payments
The biggest issue in these bankruptcies is the differential between the payments of different categories of disease claims. One faction is pushing to have a large proportion of the money set aside to pay mesothelioma and other asbestos cancer claims. Other, larger firms, some of whom have tremendous political clout, want the lion’s share of the available money to go toward paying minimal asbestos exposure claims, because that is what those firms have more of. For example, of the roughly 100,000 claims filed last year, about 1500-2000 were mesothelioma claims, a few thousand more were asbestos cancer and disabled or impaired asbestosis claims, and the rest were all unimpaired claims, most from attorney-sponsored mass screenings.