Asbestos Claims Force Hercules Voluntary Bankruptcy
Hercules Chemical Co., a century-old manufacturer and marketer of chemical and specialty products for the commercial plumbing and heating industry, announced that, on Friday, Aug. 22, 2008, it filed a petition for bankruptcy relief under Chapter 11 with the United States Bankruptcy Court for the Western District of Pennsylvania.
President and CEODavid Siegalsaid that the petition was filed for the sole purpose of facilitating a comprehensive resolution of more than 7,000 outstanding lawsuits that had been filed against the company seeking damages for personal injuries allegedly arising from contact with one of Hercules’ products produced prior to 1983 that contained a small amount of fully-encapsulated asbestos fibers. Siegal emphasized that absent its asbestos difficulties, Hercules is a highly successful firm.
Hercules is a 100 percent employee-owned (ESOP) company with approximately 85 salaried and hourly workers. All of its products are distributed under an arrangement with Oatey Supply Chain Services Inc., a Cleveland–based national sales and marketing organization handling a wide variety of PHC brands and products. Hercules has had discussions concerning its Chapter 11 filing with Oatey and fully expects the relationship to continue unabated.
Leonard Ruvolo, vice president and CFO, stated that the company had agreed to a debtor-in-possession financing arrangement with Wachovia Bank that will enable it to continue its operations during the Chapter 11 without interruption. According to Ruvolo, in addition to the debtor-in-possession financing, the company has significant unrestricted cash reserves that it intends to use to support a plan of reorganization.
To support its operations, Hercules has filed several “first day” motions with the Bankruptcy Court seeking authority to make payments to employees as well as its suppliers and service providers in the normal course of business. The court is expected to rule on those motions within the next few days.
Ruvolo also noted that Hercules has been in discussions with several law firms representing asbestos plaintiffs and fully expects to be in a position to propose a plan of reorganization that will channel all existing and future asbestos-related claims to a trust.