Grace Bankruptcy Exit Financing Drops to $600 Million

W.R. Grace & Co., a producer of catalysts used in oil refining, said the amount it will need to borrow to exit almost a decade of bankruptcy dropped to $600 million after its cash holdings swelled.

Grace will use $1 billion of cash to help fund its exit from Chapter 11 bankruptcy protection, Chief Financial Officer Hudson La Force III said today in a telephone interview. That compares with the Columbia, Maryland-based company’s forecast in July that it would need to borrow $800 million. Grace said in 2008 it would need $1.5 billion.

The cash and debt will fund a trust compensating people with lung diseases related to asbestos that used to be found in Grace products. The reorganization plan, which was approved by U.S. Bankruptcy Judge Judith Fitzgerald on Jan. 31, needs a higher court’s approval because it would require future asbestos victims to seek compensation from the trust rather than Grace.

Fourth-quarter profit excluding some taxes, bankruptcy costs and restructuring expenses rose to 62 cents a share from 47 cents a year earlier, Grace said today in a statement. That topped the 61-cent average estimate of three analysts in a Bloomberg survey.

Revenue gained 4.1 percent to $693 million as sales volumes gained 5.3 percent and average product prices advanced 1.4 percent. The construction unit’s sales climbed 2 percent, the first increase since 2008, La Force said.

Rare Earths

Profit margins at the Grace Davison unit, which makes catalysts, narrowed because of higher raw-material costs, La Force said. Prices for lanthanum, a rare-earth element used in catalysts, surged eightfold in a year. Surcharges introduced in the fourth quarter to recoup those costs probably will remain through 2011 because rare-earth prices will likely stay at current levels, La Force said.

Earnings before interest and tax in 2011 will increase as much as 18 percent to $385 million, Grace said. That compares with estimated ebit of $355 million, according to the average of three analysts surveyed by Bloomberg. Sales will rise as much as 10 percent to $2.95 billion, it said.

Grace rose 73 cents, or 2 percent, to $36.79 as of 4:15 p.m. in New York Stock Exchange composite trading.

The company’s cash balance rose 25 percent to $1.1 billion as of Dec. 31.

Grace filed for Chapter 11 bankruptcy protection in April 2001. The bankruptcy case is In re W.R. Grace, 01-1139, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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