On May 31, 2010, Specialty Products Holding Corp (“SPHC” or the “Debtor”), filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware. This post is one of two posts regarding the SPHC bankruptcy. The first post will look at the Debtor’s businesses and events leading up to the bankruptcy filing, while a second post will look at how SPHC intends to deal with the large volume of asbestos claims that forced it to file for bankruptcy.
The Debtors’ Business
According to documents filed in the Debtor’s bankruptcy proceeding, up until May of this year SPHC operated under the name RPM, Inc., or Republic Powdered Metals, Inc.. SPHC is the parent company to Bondex International, Inc. (“Bondex”). Bondex filed for bankruptcy protection in Delaware at the same time as SPHC and the two bankruptcy proceedings are being jointly administered. See Debtor’s Declaration in Support of First Day Pleadings at *3.
SPHC and its subsidiaries manufacture, distribute and sell chemical products used in insulation, powder coatings, cleaning products, fuel additives and sealants. The company’s products are sold under the names Chemspec, Day-Glo, Dryvit, Guardian, Mohawk, Kop-Coat and Valvtect.
SPHC is a wholly owned subsidiary of RPM International (“RPM”). RPM is a not a debtor in the Delaware bankruptcy proceedings. RPM is an international holding company with subsidiaries that manufacture products similar to those of the Debtor. Whereas the Debtor’s revenue for 2009 totaled $329 million, RPM’s revenues hit $3.4 billion during this same time frame. See Declaration, at *4.
The Motivation Behind Filing for Bankruptcy
The SPHC bankruptcy is not your typical bankruptcy. Many of the Chapter 11 debtors that filed for bankruptcy within the last year blame their filing on either the global recession or an overall tightening of commercial credit (or a combination of the two). Not SPHC. According to its Declaration, the company’s “businesses and operations are healthy and profitable, and generate cash.” Declaration, at *5.
Instead of the being forced in to bankruptcy due to the global recession, SPHC filed for bankruptcy in order to deal with the 10,000+ asbestos related bodily injury lawsuits pending against it. SPHC blames its asbestos exposure on the acquisition of Reardon Company in 1966. Reardon manufactured and sold a joint compound that was used by consumers in home repairs. The product contained asbestos and SPHC continued selling the product for approximately eleven years. In addition to the joint compound, Debtors sold other products containing asbestos (roofing, sealants, etc.) through the early 1980s. Id.
Since the 1980s, Bondex has been named as a defendant in approximately 20,000 asbestos related lawsuits. Similarly, SPHC has been named as a defendant in more than 8,000 asbestos related suits. Currently, Debtor is a defendant in over 10,000 such suits. Based on current filings, the Debtor expects to be named in many more lawsuits for the near future. SPHC estimates that its asbestos costs from 2005 to 2009 range between $60 million and $82 million per year. It is these costs that SPHC seeks to gain control of through bankruptcy.
In the next post we will look at how SPHC intends to frame the bankruptcy proceeding to address is asbestos exposure. This bankruptcy proceeding is before the Honorable Kevin J. Carey, Chief Judge of the United States Bankruptcy Court for the District of Delaware. A copy of the Debtor’s petition for bankruptcy is available here. A copy of the Declaration is available here.