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The TCR reported Friday that State Insulation Corporation filed for Chapter 11 protection (Bankr. D. N.J. Case No. 11-15110) in Trenton, New Jersey, on Feb. 23 to reorganize and provide for payment of its asbestos and other liabilities and preserve its business for the benefit of all creditors and other stakeholders.
State Insulation is a distributor of insulation products and accessories for the installation of insulation. It has never manufactured any products. The Debtor employs 24 people and its sales are focused in New York, New Jersey, Pennsylvania and certain foreign markets. The Debtor delivers the products it sells using its own fleet of trucks and by common carriers, including shipping product overseas via steamship.
The Debtor estimated assets and debts of $1 million to $10 million as of the Chapter 11 filing.
"During 2008, the Debtor grew to approximately $24 million in sales, however, due to the downturn in the world economy, the Debtor's sales for 2010 are forecast to be $14 million. The Debtors do not anticipate returning to the revenue levels of 2008 in the near future as the economy recovers from the recession of 2009," relates George Lionikis, Jr., chief executive officer of State Insulation.
The Debtor owes $500,000 under a secured loan provided by I&G, an entity owned by its CEO, George Lionikis, Sr.
From its formation through 1977, the Debtor distributed many different insulation products, a small percentage of which contained asbestos as an ingredient. Hundreds of asbestos suits were filed against the Debtor in the 80s and 90s but the Debtor was able to have many cases dismissed as a result of the Debtor's production of evidence demonstrating it had not sold asbestos containing products to the claimant's employers or jobsite. There are still currently approximately 90 asbestos-related actions against the Debtor pending. At the rate the asbestos claims were being filed against and being settled by the Debtor and its insurance carrier, it appeared that the Debtor would be able to address all of the claims through (a) the insurance currently in place (approximately $1.3 million remains) and (b) after exhaustion of the insurance proceeds, with cash flow from operations, Mr. Lionikis relates.
"However, in recent years, there has been an increase in the number of mesothelioma claims, which often result in larger settlements than other asbestos-related claims. Up until 2009, with over 5000 claims either settled or dismissed, the Debtor had only paid a handful of settlements in excess of $100,000, but in 2009 the Debtor had to settle a single claim for $525,000. As of the Petition Date, there are a number of mesothelioma cases that are scheduled for trial or likely to be in the near future," Mr. Lionikis explains.
"While there are fewer and fewer defendants as time passes, the claims are now much larger and the Debtor will be unable to sustain the defense of the remaining and anticipated claims out of the remaining insurance or cash flow, particularly in light of the decline in the Debtor's operating revenues that began in 2009 and is expected to continue for the foreseeable future."
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