W.R. Grace Bankruptcy Exit in Question
The Wall Street Journal reports that “bank demands for about $100 million in extra interest payments could upset a key deal with asbestos creditors, derailing W.R. Grace & Co.’s bid to exit from Chapter 11 bankruptcy.”
According to the article, a deal reached in April should allow Grace to close the bankruptcy in 2009. However, banks requesting interest at default rates may throw a monkey wrench into the plans.
In papers presented to the court, Grace said they were “poised to proceed with the proposed asbestos settlement and emerge from Chapter 11. The lenders’ most recent demand, however, threatens to derail that process.”
Technically, the banks have deemed Grace’s Chapter 11 proposal “unconfirmable” because they claim it short-changes them by failing to give them the default rate of interest on their loans.
The company has asked presiding judge, Judith Fitzgerald, to quickly decide whether or not the banks are entitled to the extra interest.
“If the banks win a ruling from Judge Fitzgerald that the company owes them interest at the higher rate, a trial that was stopped midway for the settlement will start up once more,” Grace warned.
“That’s because the outcome of the trial will determine whether Grace has enough value to cover its asbestos liabilities and other debts,” the article explains. “If Grace is found to be solvent, banks could be entitled to collect interest at default rates, which are higher than the rate specified in the loan contract.”
