Industrial machinery maker Circor International's subsidiary Leslie Controls Inc filed for Chapter 11 bankruptcy on Monday in a bid to isolate and resolve asbestos-related personal injury claims.
The cost of this defense has exceeded the profits generated by Leslie's operations, said Bill Higgins, chief executive of Circor, which will record a charge of $28.8 million in the second quarter due to the bankruptcy.
Since 2002, Leslie has been named in a number of asbestos-related personal injury claims relating primarily to the use of asbestos on U.S. Navy ships from the 1940s to the 1980s.
It currently has about 1,307 pending asbestos personal injury claims against it, court papers show.
Asbestos, once widely used in manufacturing, has been partially banned by the U.S. government after it was proven to cause cancer, often in people who were exposed by breathing in asbestos particles.
According to the bankruptcy plan, a new trust will be created to handle all current and new litigation claims providing both Leslie and Circor with permanent court protection from such claims, the parent company said in a statement.
Funding for the trust will consist of a $75 million contribution by Leslie and Circor, and proceeds from Leslie's remaining asbestos insurance assets.
Leslie, which employs 178 people and recorded net revenue of over $35 million in 2009, could exit bankruptcy in 120 days, Circor said in a statement.
In its Chapter 11 petition, Leslie, which makes process control valves, listed assets in the range on $10 million to $50 million and liabilities of $50 million to $100 million.
The case is In re: Leslie Controls Inc, U.S. Bankruptcy Court, District of Delaware (Delaware), No: 10-12199.
(Reporting by A.Ananthalakshmi and Santosh Nadgir in Bangalore; Editing by Prem Udayabhanu)