Thursday , December 9 2021

J&J claims baby powder that stimulates bankruptcy despite $ 25 billion in cash



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J&J owes at least $ 2 billion to people who say they got sick from asbestos-contaminated baby dust.

J&J owes at least $ 2 billion to people who say they got sick from asbestos-contaminated baby dust.

Justin Sullivan / Getty Images

Only two companies in the world can pay their bills so reliably that they get perfect credit ratings from both S&P and Moody’s. But one of them, Johnson & Johnson, has just gone to bankruptcy court to deal with customers who argue that the company’s products have caused them cancer.

The consumer product giant failed a unit on Thursday because it owes at least $ 2 billion to people who say they got sick from asbestos-contaminated J&J baby dust.

J&J is far from the regular user of Chapter 11 protection. It has about $ 25 billion in cash and a $ 10 billion line of credit, easy enough to establish the proposed victims’ trust fund.

However, J&J is not the first solvent company to face asbestos claims taking this route. At least three others, Georgia Pacific, Trane Technologies and Saint-Gobain, are testing the same strategy.

In a move known in legal circles as the “Texas Two-Step,” bankruptcy judges have allowed companies facing large litigation claims to mix their corporate charts and set up special units to house their liabilities. asbestos by a business-friendly Texas law.

One company first moves its corporate charter to Texas, then splits into two: one part keeps its assets and business healthy, while the other has asbestos demands.

The latter then goes bankrupt, suspending all current and future asbestos processes until the company draws up a plan to amortize them. J&J did so in the federal bankruptcy court in North Carolina, where two judges ruled that the lawsuit is legitimate about the victims ‘attorneys’ objections. By joining this club, J&J gets all the advantages of Chapter 11 with almost none of the disadvantages. The corporation itself is not bankrupt. Moody’s Investors Service assures that the company’s credit rating will not be affected by the filing, and J&J did not immediately return emails seeking any comments.

With the assistance of Lara Wieczezynski and Jeremy Hill.

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