December 10, 2020 – The Debtors filed their Fourth Amended Plan of Reorganization and related Disclosure Statement [Docket Nos. 2615 and 2616, respectively]. They further filed blacklines of each document showing changes from the version filed on October 16th [Docket No. 2617].

The amendments do not reflect any material changes to the Debtors’ summary of classes, claims, voting rights and expected recoveries, otherwise summarized below. However, the Amended Plan does reflect revisions to the Imerys cash contribution and gives a more detailed description of Imerys settlement funds (see more on Imerys Settlement below).

The DIP term sheet has been removed from the exhibits to the Fourth Amended Disclosure Statement. The document states that the Court requested more information from the Debtors at a November 16, 2020 DIP Financing hearing, and the final DIP order has not yet been entered.

The Fourth Amended Plan also makes several changes and additions to the proposed confirmation timetable that would culminate in a not-yet-specified March 2021 Plan confirmation hearing (see proposed dates below).

Plan Overview

The Disclosure Statement [Docket No. 2616] notes, “The North American Debtors commenced their Chapter 11 Cases in order to manage the significant potential liabilities arising from claims by plaintiffs alleging personal injuries caused by exposure to talc mined, processed and/or distributed by one or more of the North American Debtors. As of the Petition Date, one or more of the North American Debtors had been sued by approximately 14,650 claimants seeking damages for personal injuries allegedly caused by exposure to the North American Debtors’ talc products, with the vast majority of such claims (approximately 98.6%) based on alleged exposure to cosmetic talc products.

The Debtors’ stated purpose of the Chapter 11 Cases is to confirm a plan of reorganization that will maximize the value of the Debtors’ assets for the benefit of all stakeholders and, pursuant to sections 524(g) and 105(a) of the Bankruptcy Code, will include a trust mechanism to address Talc Personal Injury Claims in a fair and equitable manner. The Plan Proponents believe that the Plan accomplishes these goals. Indeed, the Plan embodies a global settlement of issues (the ‘Imerys Settlement’) among the Plan Proponents and implements a comprehensive settlement among the Debtors, on the one hand, and Rio Tinto America Inc. (‘Rio Tinto’), on behalf of itself and the Rio Tinto Captive Insurers and for the benefit of the Rio Tinto Protected Parties and Zurich American Insurance Company, in its own capacity and as successor-in-interest to Zurich Insurance Company, U.S. Branch (‘Zurich’), on behalf of itself and for the benefit of the Zurich Protected Parties, on the other hand, and consented to by the Tort Claimants’ Committee and the FCR (the ‘Rio Tinto/Zurich Settlement’).

The Rio Tinto/Zurich Settlement finally resolves disputes over (i) alleged liabilities relating to the Rio Tinto Corporate Parties’ prior ownership of the Debtors, (ii) alleged indemnification obligations of the Rio Tinto Corporate Parties and (iii) the amount of coverage to which the Debtors claim to be entitled under the Talc Insurance Policies issued by the Zurich Corporate Parties and the Rio Tinto Captive Insurers. The Imerys Settlement and the Rio Tinto/Zurich Settlement will generate substantial recoveries for the holders of Talc Personal Injury Claims.

Pursuant to the Plan, a Talc Personal Injury Trust will be established that will comply in all respects with the requirements of section 524(g)(2)(B)(i) of the Bankruptcy Code, and assume all Talc Personal Injury Claims. The Talc Personal Injury Trust will be funded with the Talc Personal Injury Trust Assets in order to resolve Talc Personal Injury Claims in accordance with the Talc Personal Injury Trust Documents. Moreover, remaining proceeds from the Sale (as defined below) will be used to fund the Talc Personal Injury Trust in accordance with the terms of the Plan. As further described in this Disclosure Statement, the Talc Personal Injury Trust will manage the Talc Personal Injury Trust Assets and liquidate such assets to enable it to resolve Talc Personal Injury Claims pursuant to the Trust Distribution Procedures.

Under the Plan, holders of Allowed Unsecured Claims against the North American Debtors that are not Talc Personal Injury Claims will be paid in full.

Although ITI is not currently in bankruptcy, ITI will solicit acceptance of the Plan as a ‘prepackaged plan of reorganization’ and if the Plan is approved by the requisite number and amount of holders of Talc Personal Injury Claims, it would provide for the permanent settlement of Talc Personal Injury Claims against ITI contemporaneously with the Talc Personal Injury Claims against the North American Debtors. Holders of Equity Interests in and Claims against ITI (other than holders of Talc Personal Injury Claims and Non-Debtor Intercompany Claims) will be Unimpaired or otherwise ‘ride through’ the Chapter 11 Cases.”

The following is an unchanged summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and Disclosure, See liquidation Analysis below):

• Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to North American Debtors and ITI. The estimated recovery is 100%. 
• Class 2 (“Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to North American Debtors and ITI. The estimated recovery is 100%. 
• Class 3a (“Unsecured Claims Against the North American Debtors”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%. This class is applicable to North American Debtors.
• Class 3b (“Unsecured Claims Against ITI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to ITI. The estimated recovery is 100%. 
• Class 4 (“Talc Personal Injury Claims”) is impaired and entitled to vote on the Plan.  The estimated recovery is unknown. On the Effective Date, liability for all Talc Personal Injury Claims shall be channeled to and assumed by the Talc Personal Injury Trust without further act or deed and shall be resolved in accordance with the terms and procedures of the Talc Personal Injury Trust and the Trust Distribution Procedures. Pursuant to the Plan and the Trust Distribution Procedures, each holder of a Talc Personal Injury Claim shall have its Claim permanently channeled to the Talc Personal Injury Trust, and such Claim shall thereafter be resolved in accordance with the Trust Distribution Procedures. This class is applicable to North American Debtors and ITI.
• Class 5a (“Non-Debtor Intercompany Claims”) is impaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to North American Debtors and ITI. The estimated recovery is 0%.
• Class 5b (“Debtor Intercompany Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to North American Debtors and ITI. The estimated recovery is 100%.
• Class 6 (“Equity Interests in the North American Debtors”) is impaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to North American Debtors. The estimated recovery is cancellation of the Interests.
• Class 7 (“Equity Interests in ITI”) is unimpaired, deemed to accept and not entitled to vote on the Plan. This class is applicable to ITI. The estimated recovery is reinstatement of the Interests. 

Proposed Key Dates

• Disclosure Statement Hearing/Voting Record Date: December 17, 2020
• Deadline to File Plan Supplement: January 5, 2021 
• Voting Deadline: February 15, 2021
• Confirmation Objection Deadline: Three (3) weeks before Confirmation Hearing
• Confirmation Hearing: March 2021

Imerys Settlement

To resolve the Debtors’ Talc Personal Injury Claims, the Plan incorporates a global settlement between the Plan Proponents that provides:

• the Debtors will commence a 363 sale process to sell substantially all assets of the North American Debtors (the “Sale”) to one or more purchaser(s) (the “Buyer”), in which Imerys S.A. or its non-debtor affiliates (each, a “Non-Debtor Affiliate”, and together with Imerys S.A., the “Imerys NonDebtors”) may participate in any auction as bidder, but will not be designated as a stalking horse purchaser (if any is selected);
• in the event the Plan is properly accepted by holders of Talc Personal Injury Claims, ITI will commence a chapter 11 bankruptcy proceeding to be jointly administered (subject to Bankruptcy Court approval) with the North American Debtors’ Chapter 11 Cases prior to the Confirmation Hearing;
• the equity interests in the North American Debtors will be canceled, and, on the Effective Date, equity interests in the Reorganized North American Debtors will be authorized and issued to the Talc Personal Injury Trust; and
• the equity interests in ITI will be reinstated following the Effective Date, with approximately 99.66% of such equity interests retained by Mircal Italia S.p.A. (“Mircal Italia”), a Non-Debtor Affiliate.

The Fourth Amended Disclosure statement notes that the Court approved the Sale of substantially all of the Debtors’ assets to Magris Resources Canada Inc. on November 17, 2020 for a purchase price consisting of: (i) $223.0mn in cash consideration and (ii) the assumption of the Assumed Liabilities (as defined in the Asset Purchase Agreement) [Docket No. 2539]. The APA (dated “as of” October 13, 2020) is attached to the order as Exhibit A. 

In addition, the Fourth Amended Disclosure Statement provides, "The Imerys Settlement Funds consist of (i) $75 million, consisting of $74.5 million Cash and the Talc PI Note [estimated to be valued at $200k], plus (ii) the Sale Proceeds, plus (iii) a contingent purchase price enhancement of up to $102.5 million, subject to the Cash value of the Sale Proceeds provided that in the event the Sale contemplated by and pursuant to the Sale Order closes, no contingent purchase price enhancement shall be payable, less (iv) if the DIP Order is entered, amounts required to pay the DIP Facility Claims pursuant to the terms of the DIP Loan Documents and Allowed by the DIP Order, less (v) if the DIP Order is not entered, Imerys S.A.’s reasonable and documented out-of-pocket costs and expenses of negotiation and preparation of the DIP Loan Documents estimated to be $400,000 as of December 10, 2020."

In respect of the Imerys cash contribution. the Fourth Amended Disclosure Statement explains, "On or prior to the Effective Date, the Imerys Non-Debtors have agreed to contribute, or cause to be contributed, the following to the Debtors or the Reorganized Debtors, as applicable (the 'Imerys Cash Contribution'):

• (1) the balance of the Intercompany Loan (as defined in Section 3.1(d)(2) of this Disclosure Statement) totaling approximately $14.1 million as of October 31, 2020, for the purpose of funding administrative expenses during the pendency of the Chapter 11 Cases, as well as certain of the Reserves;
• (2) $5 million (less any amounts already paid and noted in an accounting to the Tort Claimants’ Committee and the FCR) for payment of Allowed Claims in Class 3a through inclusion in the Reorganized North American Debtor Cash Reserve or the Disputed Claims Reserve, as applicable; and
• (3) The lesser of (x) $15 million and (y) fifty percent (50%) of the sum of (I) any administrative expenses paid by the Debtors with the proceeds of the DIP Facility plus (II) any administrative expenses paid by the Debtors from the Sale Closing Date through the Effective Date plus (III) any amounts necessary to fund all reserves, costs or expenses required in connection with the Debtors’ emergence from bankruptcy million separate from the Unsecured Claim Contribution (the 'Contingent Contribution'); provided that if the Plan is confirmed before May 31, 2021 and the Sale does not close before the Effective Date (such that the DIP Facility Claims have been satisfied in full from the Sale Proceeds and discharged in accordance with the DIP Loan Documents), then (A) the outstanding principal amount of any DIP Loans (excluding any PIK Interest (as defined in the DIP Loan Documents)) shall be applied as a dollar-for-dollar reduction of the amount of the Contingent Contribution required to be contributed by Imerys S.A. to the Debtors or the Reorganized Debtors (in an amount not to exceed $15,000,000), and the remaining outstanding principal amount of any DIP Loans (excluding any PIK Interest), after giving effect to the application in clause (A) above, shall be applied as a dollar-for- dollar reduction of the $75 million in Cash that is part of the Imerys Settlement Funds.

Liquidation Analysis (see Exhibit D to Disclosure Statement [Docket No. 2090] for notes)

About Imerys Talc America

Imerys Talc America is the leading talc producer on the American continent, with operations in Montana, Vermont, and Texas. The company supplies premium-quality, talc-based solutions to a wide variety of industrial applications including paints, plastics, ceramics, rubber, paper, agriculture, adhesives and sealants, building products, cosmetics and pharmaceuticals.

About Imerys Talc Canada

Imerys Talc Canada is a leading talc producer on the American continent, with operations in Timmins and Penhorwood. The company supplies premium-quality, talc-based solutions to a wide variety of industrial applications including paints, plastics, ceramics, rubber, paper, agriculture, adhesives and sealants, building products, cosmetics and pharmaceuticals.

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