Posted on 11 Mar 2013 by Neilson
Rapid-American Corp. filed for Chapter 11 bankruptcy protection Friday to deal with the asbestos personal injury claims it says have been piling up for decades.
Rapid, whose bankruptcy filing follows a long line of manufacturers that have turned to Chapter 11 to help them resolve thousands of asbestos claims, never made products that contained asbestos. Instead, the claims it faces relate to the building products sold by the Philip Carey Manufacturing Co., which Rapid acquired through a series of mergers over the past several decades.
While Rapid faced its first asbestos lawsuit in 1974, it hasn't needed to turn to Chapter 11 until now.
"Recently, Rapid has experienced an increase in the number of mesothelioma claims being filed against it and an increase in the dollar amount sought to settle claims," the company said in court papers. "Mesothelioma claims, which generally result in higher settlement values, now represent approximately 34% of newly filed claims against Rapid."
Mesothelioma is a cancer of the tissue lining the lungs, stomach, heart or other organs, according to the National Institutes of Health. It typically strikes people who worked in jobs that exposed them to asbestos particles via inhalation, although it can be several decades between exposure and getting the disease.
Not only does Rapid face 275,000 asbestos personal injury claims, the dollar amount of which is currently unknown, but it also said the insurance proceeds that it is "wholly dependent" upon to pay such claims are "dwindling."
Rapid hopes to use the breathing room Chapter 11 offers from lawsuits to develop a plan that will fairly distribute its remaining insurance proceeds among current and future asbestos creditors.
Rapid, a holding company whose subsidiaries once operated such retailers as women's apparel chain Lerner, is led by President Meshulam Riklis, known for funding a wave of corporate takeovers several decades ago with a then-new financing tool of which other dealmakers were skeptical: high-yield, or junk, bonds.
Rapid reported assets of $50 million to $100 million in its bankruptcy petition, filed with the U.S. Bankruptcy Court in Manhattan. Its liabilities are an estimated $100 million to $500 million.
The case, numbered 13-10687, has been assigned to Judge Stuart M. Bernstein.