Pfizer to Lend Its Bankrupt Quigley Unit Up to $65 Million
Pfizer Inc. (PFE) agreed to lend its Quigley unit as much as $65 million in cash to extend the subsidiary’s bankruptcy, potentially giving Pfizer further protection against claims for asbestos-related health issues.
Quigley asked U.S. Bankruptcy Judge Stuart Bernstein for permission to borrow the money in court papers filed July 29 in Manhattan. The cash would extend Quigley’s $20 million loan agreement from 2004, when the unit entered bankruptcy, and finance the case until Feb. 24, 2012, Quigley said.
The additional money and time will free Quigley to work with Pfizer, the world’s largest drugmaker, and a committee of creditors “toward confirmation and consummation of a reorganization plan,” Quigley said.
Lawyers for the U.S. Trustee, an arm of the Justice Department, asked in December to end Quigley’s bankruptcy. Creditors alleging asbestos-related health issues have been unable to sue New York-based Pfizer during the case, and many of them have died, the U.S. Trustee said.
Christopher Loder, a Pfizer spokesman, said the company looks forward to working through a bankruptcy plan with Quigley and creditors, which the extension of the credit agreement will allow.
“In 30 years of asbestos litigation, Pfizer has never been found to be derivatively liable for Quigley’s liabilities,” Loder said. Quigley’s products were made for decades before Pfizer acquired it, he said.
A hearing on a request to dismiss Quigley’s bankruptcy or approve proposed terms of its reorganization, set for Aug. 4, was adjourned without being rescheduled, according to court papers.
Quigley Co., founded in 1916, made three products for the steel industry from the 1940s to the 1970s that contained asbestos. Pfizer bought Quigley in 1968, and the company stopped most operations in 1992. Pfizer said it never made or sold any Quigley products, and some claimants hadn’t released Pfizer from alleged “derivative liability.”
Bernstein refused to allow Quigley to exit Chapter 11 court protection in September, saying Pfizer had manipulated the process to benefit itself. Pfizer and a committee of asbestos claimants won his approval of an agreement that will support the new Chapter 11 plan, which still requires court approval.
A committee of creditors known as the “Ad Hoc Committee of Tort Victims” asked in October 2010 to have Quigley’s bankruptcy dismissed so it could bring tort claims, which are otherwise blocked by bankruptcy law.
In court papers, the group called Quigley an “asset-less dummy entity that was resurrected, handed Pfizer’s money-losing claims handling unit, and then propped up by Pfizer pursuant to a non-arm’s-length contract of limited duration -- all in order to provide Quigley’s extremely well-heeled non-debtor parent Pfizer with a channeling injunction against present and future asbestos claims.”
The group said Quigley has depleted insurance assets to sustain $54 million in operating losses and $34 million in professional fees.
Quigley’s sixth outline of a plan to reorganize, filed in April, would have resolved disputes over how much Pfizer should contribute by having it turn over a 281,581-square-foot building leased to a brewery to help pay asbestos claims. The terms of that reorganization also required Pfizer to forgive a secured claim of $86 million, a $12.6 million bankruptcy loan and unsecured claims of $33 million. The drugmaker would also contribute $81 million in insurance proceeds, according to court papers.
Asbestos claims against Quigley may total $4.45 billion during the next 42 years, according to testimony cited by Bernstein in September. In November, Pfizer reported a $701 million third-quarter charge for asbestos litigation related to Quigley.
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