Saved by asbestos?

Byline: Soma Biswas

More than 60 companies have entered bankruptcy because of asbestos liability since 1976. For one of them, W.R. Grace & Co., it's been a blessing.

If that sounds paradoxical, it is. Lawmakers in Washington have been hammering away at legislation to create a $100 billion-plus trust that would pay the claims of those sickened by asbestos and once and for all free corporations from the massive liabilities hanging over them. Yet for Grace, the forever conglomerate, the company whose portfolio of businesses would change faster than the seasons, asbestos liability provided an out.

The Columbia, Md.-based company was able to use asbestos as its excuse to declare bankruptcy, where it can stay a good, long time to try to get its act together beyond the demands of shareholders. In a strange twist, Grace, long a corporate villain because of the pollution problems it caused in places such as Woburn, Mass., and Libby, Mont., has now been recast as a victim.

Just recently, Grace announced that it had named a new president and chief operating officer so its chairman and CEO, Paul J. Norris, can focus on getting the company out of bankruptcy. When other companies talk about rushing out of bankruptcy, they put it in terms of months. But not Grace. The company has said it might not come out until 2007. Another four years in Chapter 11 seems like a long time when your CEO is dedicating himself to the task.

Especially when you've already been in there for well over two years. Grace filed for Chapter 11 with the U.S. Bankruptcy Court for the District of Delaware in Wilmington on April 2, 2001. The company, which now fancies itself as a specialty chemicals producer, got a judge's permission in August to extend its exclusive right to file a reorganization plan to April 1, 2004. It was its fifth such extension. And the $250 million debtor-in-possession financing that Bank of America Corp. is providing? In March, Grace got it extended three years to April 2006.

Currently, the company says it …