Kelly-Moore Paints set to wind down in wake of asbestos lawsuits

By Sarah Lizee

Olympia, Wash., Jan. 12 – Kelly-Moore Paints plans to immediately cease operations and start an out-of-court wind-down of substantially all its business, according to a Friday press release.

During the wind-down process, the company will continue to try to fulfill previously placed customer orders to the extent possible from existing inventory in Kelly-Moore’s Union City, Calif., distribution facility.

All the company’s other facilities will be permanently closed effective immediately, including Kelly-Moore’s manufacturing facility in Hurst, Tex., and its retail stores, all of which were leased.

Kelly-Moore said employees will be fully compensated for regular time worked, and management will continue its efforts to collect receivables to pay all accrued benefits including paid time off.

The company recently announced a furlough of about 700 employees across its locations, as well as an operational halt at its manufacturing facility.

At the time, the company said it had a number of interested investors with which it was working, in hopes of allowing for a return to full operations.

Since then, the company continued actively seeking new capital to enable a turnaround, with assistance from financial adviser Houlihan Lokey. But none of the interested investors have stepped forward with a letter of intent, and the company has not secured the additional funding needed to continue operations.

“Sadly, no matter how great the Kelly-Moore team, products and reputation for service, we simply couldn’t overcome the massive legal and financial burdens that have been weighing on the company for many years,” chief executive officer Charles Gassenheimer said in the release.

For over 30 years, the company said it has been grappling with thousands of asbestos litigation claims related to the company’s past use of asbestos in cement and texture products under prior ownership, a practice that was discontinued in 1981.

“Through the cumulative cash drain caused by legal settlements and the cost of defending ever-continuing case filings, the company’s ability to reinvest in the business – including investments needed to address historical supply chain challenges that were exacerbated by the recent pandemic – has been severely constrained for an extended period of time,” the company said.

Despite paying out approximately $600 million over the past 20 years to settle asbestos claims, a recent study commissioned by the company estimates future asbestos liabilities exceed $170 million.

The company said it has also been impacted by insurmountable legal liabilities inherited by the current ownership group from their 2022 acquisition of the company, including millions of dollars of previously unpaid sales and use taxes. The company is pursuing its legal rights with respect to these claims.

“Neither a bankruptcy reorganization nor an in-court liquidation is viable or advantageous given the company’s inability to fund its continued operations, as well as the fact that the company leases all its facilities and has no unencumbered hard assets that could be made available for distribution to creditors,” the company said.

Kelly-Moore Paints is a paint manufacturing company based in Irving, Tex.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.