Kelly-Moore Paints, a paint maker and retailer, has made the decision to shut down its operations due to the significant impact of asbestos lawsuits. These legal battles have resulted in the company accruing approximately $170 million in liabilities.
Recently acquired by investment firm Flacks Group in 2022, Kelly-Moore Paints furloughed its 700 employees and ceased manufacturing operations earlier this week. Despite efforts to secure additional funding to keep the company afloat, they were unsuccessful.
In an attempt to fulfill previous orders, Kelly-Moore will utilize their existing inventory. However, this closure is the result of the company’s long history of grappling with asbestos-related lawsuits. The use of asbestos in their cement and texture products was discontinued in 1981. Over the past two decades, Kelly-Moore has already paid out around $600 million in settlements for these asbestos-related cases. A recent study estimated that their future asbestos liabilities would exceed $170 million.
In addition to asbestos-related issues, Kelly-Moore has also faced legal liabilities tied to unpaid taxes, which were inherited by the current ownership. The company is actively pursuing its legal rights concerning these claims.
Given their insufficient funds to continue operations, the company determined that filing for bankruptcy or pursuing in-court liquidation would not be feasible or advantageous. With all of their facilities leased and no unencumbered assets, this decision was difficult yet unavoidable.
Under the new ownership of Flacks Group, Kelly-Moore Paints became part of Pleuger Chemicals in 2022. The headquarters relocated to Texas, followed by efforts to establish new supply-chain partnerships and plans for technology and store upgrades. The company also enlisted the help of advisors to explore possibilities for new capital investments or potential reorganizations.
“The ownership group’s commitment from day one was to fix the business if we could,” stated Chief Executive Charles Gassenheimer. “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.”
