Case | HBS Case Collection | December 2012 (Revised February 2013)

W.R. Grace & Co: Dealing with Asbestos Torts

by Stuart C. Gilson and Sarah L. Abbott

Abstract

A manufacturer of buildng prducts and specialty chemicals, W. R. Grace & Co. filed for Chapter 11 bankruptcy in 2001 in response to a flood of lawsuits alleging that its products contained asbestos, and had caused hundreds of thousands of people to contract asbestos-related diseases such as mesothelioma and lung cancer. Nine years later, Grace is poised to emerge from bankruptcy with a plan of reorganization that provides for the establishment of two special purpose trusts through which all current and future asbestos claims will be channeled, allowing the company to survive as an ongoing business. However, the company and asbestos claimholders' committees materially disagree over the size of the company's liability for asbestos, and have hired experts to value the liability. Grace's expert argues the liability is worth between $83 million and $173 million, while the plaintiff's expert argues the liability could be as high as $6.2 billion.

Keywords: restructuring; valuation; capital structure; crisis management; bankruptcy reorganization; business failures; environmental regulations; class action lawsuits; Natural Environment; Valuation; Health Disorders; Capital Structure; Restructuring; Lawsuits and Litigation; Chemicals; Crisis Management; Insolvency and Bankruptcy; Legal Liability; Construction Industry; Chemical Industry; United States;

Citation:

Gilson, Stuart C., and Sarah L. Abbott. "W.R. Grace & Co: Dealing with Asbestos Torts." Harvard Business School Case 213-046, December 2012. (Revised February 2013.)