NEW YORK (CNNfn) - Building products manufacturer USG Corp. filed for federal bankruptcy protection Monday, due to mounting costs of asbestos litigation, becoming the latest in a string of companies who have filed for protection under Chapter 11 due to asbestos litigation. |
USG (USG: up $0.01 to $3.89, Research, Estimates), a Chicago-based company, as well as its major domestic subsidiaries U.S. Gypsum, USG Interiors, Inc., and L&W Supply Corp., filed for bankruptcy under Chapter 11. When a company files for Chapter 11, it is protected from creditors as it seeks to reorganize and work out a plan to pay its debts.
Other companies to file for protection under Chapter 11 recently are specialty chemical maker W.R. Grace & Co., and fiberglass and composite materials maker Owens Corning.
William C. Foote, chairman, president, and CEO, noted that the recent bankruptcies of other asbestos defendants have significantly increased USG's asbestos costs.
"We have said repeatedly that U.S. Gypsum can afford to pay for its own liability, but it cannot pay for the liability of other companies or pay everyone who was exposed to asbestos-containing products – yet that is exactly what is happening because of the high volume of new cases and other asbestos-related bankruptcies," Foote said.
The company's action follows its June 4 announcement which warned of the move.
Since 1994, USG has been named in more than 250,000 asbestos-related personal injury claims, and has paid more than $450 million for litigation. In addition, the company has received more than 22,000 new claims since the beginning of this year.
USG's personal injury costs as a result of asbestos, have risen dramatically from $30 million in 1997 to more than $160 million in 2000, and were expected to surpass $275 million in 2001.
As of March 31, 2001, the company reported consolidated assets of $3.25 billion and non-asbestos liabilities of $1.88 billion.
"While it is impossible to predict exactly how long our reorganization will take, our goal is to complete the restructuring and emerge from Chapter 11 as quickly as possible, with a comprehensive and final resolution to U.S. Gypsum's asbestos liability," said Foote.