Asbestos Bankruptcy Trust Update for October 22, 2010

Leslie Controls on the Fast Track to having its “Pre-Packaged” Bankruptcy Plan Approved­Could Begin Paying Claims by Early 2011

Leslie Controls, Inc., a wholly-owned subsidiary of CICOR International, Inc., filed for Chapter 11 bankruptcy protection in July 2010 citing overwhelming liabilities for current and future asbestos injury claims.

Since the early 1900’s, Leslie was a major manufacturer of industrial water heaters and steam control systems. Leslie was a large supplier of valves and other steam equipment to the United States Navy during World War I and World War II. Leslie’s products, which were often equipped with asbestos gaskets, insulation and packing, were responsible for exposing thousands of Americans to harmful asbestos fibers.

Upon filing for Chapter 11, Leslie received temporary immunity from all pending and future lawsuits brought by asbestos illness victims. Leslie will be entitled to permanent immunity upon certification of its bankruptcy plan by the bankruptcy court and approval by a Federal District Court. The one consolation to asbestos injury victims is the requirement that Leslie’s bankruptcy plan provide for the funding of a trust and a system for compensating claimants based on factors including the severity of their illness.

Leslie made substantial progress toward its emergence from bankruptcy when it obtained the asbestos claimant votes necessary for approval of its bankruptcy plan earlier this month. For the plan to be affirmed by the courts, bankruptcy law requires approval by at least 75 percent of current asbestos claimants. The vote on Leslie’s plan was completed on September 27, 2010, and on October 8, 2010 the balloting agent reported to the U.S. Bankruptcy Court that more than 75 percent of claimants had voted in favor of the plan.

Based on the progress to date, CIRCOR is targeting the plan’s affirmation by the courts and Leslie’s emergence from bankruptcy for the fourth quarter of 2010. Accordingly, it is conceivable that Leslie’s bankruptcy trust could begin processing claims by early 2011.

If the trust begins paying injury claims within a year of Leslie’s filing for bankruptcy, this would rank as one of the faster completions of this process among all asbestos bankruptcy trusts. By comparison, of the nine other companies which currently have proposed bankruptcy trusts pending approval, one has been in bankruptcy for over ten years, two over nine years, and another two over six years.

Leslie’s progress can be attributed to its use of a “Pre-packaged” bankruptcy plan. As compared to other bankruptcies, where the company files and thereafter begins negotiating a plan of reorganization with creditors, a pre-packaged approach involves negotiating a plan before the company files bankruptcy. Under a pre-packaged approach, the company is able to negotiate with creditors under less formal conditions, often behind closed doors, and deliver a plan of reorganization satisfying applicable rules at the same time the company files bankruptcy.

Check back often to Mesothelioma Bytes for breaking news about the Leslie Trust and other active and pending asbestos bankruptcy trusts.

Also, for information on how asbestos bankruptcy trusts came to exist, how trust claims are processed and the current status and future outlook of these trusts, see our comprehensive guide to asbestos bankruptcy trusts entitled: “Asbestos Bankruptcy Trusts: The Good, The Bad And The Ugly.”