Case Doc 5911 Filed 05/08/17 Entered 05/08/17 16:48:21 Desc Main Document Page 1 of 9

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1 Document Page 1 of 9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA Charlotte Division IN RE: GARLOCK SEALING TECHNOLOGIES LLC, et al., Debtors. 1 Case No. 10-BK Chapter 11 Jointly Administered DECLARATION OF J. MILTON CHILDRESS IN SUPPORT OF CONFIRMATION OF THE MODIFIED JOINT PLAN OF REORGANIZATION I, J. Milton Childress, declare, depose, and state as follows: 1. I submit this declaration in support of confirmation of the Modified Joint Plan of Reorganization of Garlock Sealing Technologies LLC, et al. and OldCo, LLC, Proposed Successor by Merger to Coltec Industries Inc, dated May 20, 2016 (as it may be amended and modified, the Joint Plan ) I am a Senior Vice President and the Chief Financial Officer of EnPro Industries, Inc. ( EnPro ), the ultimate parent of Debtors in this case. I have served as Senior Vice President and Chief Financial Officer since March 31, From February 2006 until March 31, 2015, I served EnPro as the Vice President for Strategic Planning and Business Development. 1 The Debtors in these jointly administered cases are Garlock Sealing Technologies LLC ( GST ), Garrison Litigation Management Group, Ltd. ( Garrison ), The Anchor Packing Company ( Anchor ) and OldCo, LLC ( OldCo ), successor by merger to Coltec Industries Inc. The term Coltec in this Declaration may refer to OldCo, LLC s predecessor, Coltec Industries Inc, when referring to events prior to the Coltec Restructuring and to OldCo, LLC when referring to events subsequent to the Coltec Restructuring. In addition, the Joint Plan contemplates that OldCo, LLC will merge with EnPro Holdings, Inc. ( EnPro Holdings ) on the Effective Date of the Joint Plan. Accordingly, the obligations of Coltec under the Joint Plan after the merger will be obligations of EnPro Holdings. 2 Capitalized terms not otherwise defined herein shall have the meaning set forth in the Joint Plan. 1

2 Document Page 2 of 9 3. This Declaration sets forth matters to which I would testify if called as a witness. The Declaration is based on my personal knowledge and materials developed to plan for the performance of Debtors and EnPro s financial contributions to the asbestos trust required by the Joint Plan, all of which were prepared under my direction. 4. The purpose of my testimony is to establish that Debtors and EnPro have the financial wherewithal to meet the financial requirements they agreed to under the Joint Plan. Stated another way, the purpose of my testimony is to show that the Joint Plan is feasible, that Debtors and EnPro will meet their obligations under the Joint Plan, and the Court should find, as required by 11 U.S.C. 1129(a)(11), that confirmation of the Joint Plan is not likely to be followed by the liquidation or the need for further financial reorganization of Debtors. Personal Background 5. I received a Bachelor of Science in Business Administration in 1979 from the University of Tennessee. I received a Masters Degree in Business Administration in 1983 from the Darden School of Business at the University of Virginia. 6. Since 1983, I have worked in the field of corporate finance and corporate strategy development for various companies and enterprises. From 1983 to 1992, I worked at Ernst & Young in corporate finance, serving as a senior manager when I left the company. From 1992 to 2001, I worked in Strategy & Corporate Development for United Dominion Industries, leaving that company as Senior Vice President. From 2001 until I joined EnPro in 2005, I was a Managing Director of McGuireWoods Capital Group. 7. Now as EnPro s Chief Financial Officer, I am the senior-most financial officer of the company. I report directly to EnPro s Chief Executive Officer. I am charged with overseeing all aspects of EnPro and its subsidiaries financial condition, the preparation of financial 2

3 Document Page 3 of 9 statements and related reports, the treasury function of the companies, financial projections, interacting with auditors, and providing information for purposes of securities filings made because EnPro is a publicly traded corporation. 8. I oversee numerous direct reports with varying job descriptions within the financial function of EnPro and its subsidiaries. Those reports, in turn, supervise others within the financial function of the companies, whether within EnPro or in one of its subsidiaries. 9. Among other things, I oversee EnPro s efforts to access capital markets, whether through equity or debt transactions. In connection with such transactions, I am generally the company s team leader representing the company in negotiations of those transactions and in providing information relevant to any underwriting process, financial reporting, or general information related to those transactions. The Comprehensive Settlement and the Joint Plan 10. The obligations of GST, Coltec, and EnPro set forth in the Joint Plan, of course, were initially agreed to in the Term Sheet for Permanent Resolution of All Present and Future GST Asbestos Claims and Coltec Asbestos Claims (the Comprehensive Settlement ) entered on March 17, Prior to Debtors and EnPro s agreement to the Comprehensive Settlement, I, along with others I supervise, evaluated the ability of Debtors and EnPro to meet the financial obligations that the Comprehensive Settlement and Joint Plan would require. 11. We concluded that Debtors and EnPro would be capable, without any material change in those companies financial conditions, to meet the $480 million financial contribution requirements outlined in the Joint Plan. 3

4 Document Page 4 of Based in part on that conclusion, the boards of directors and boards of managers (as applicable) of EnPro and Debtors approved the Comprehensive Settlement and later approved the Joint Plan. 13. The financial obligations of Debtors and EnPro under the Joint Plan are set forth in Section 7.3, entitled Funding of the Asbestos Trust. The obligations in the Joint Plan are consistent with but more detailed than those outlined in the Comprehensive Settlement. The specific financial obligations under the Joint Plan are as follows: (a) Specific cash or similar financial commitments include the following: (i) (ii) (iii) (iv) On the day immediately preceding the Effective Date, GST or Garrison shall transfer $370 million in cash to the Asbestos Trust; On the day immediately preceding the Effective Date, Coltec shall transfer $30 million in cash to the Asbestos Trust; On or before the first anniversary of the Effective Date, Coltec shall transfer the full amount of the Deferred Contribution, $60 million, in cash to the Asbestos Trust; and No earlier than the first anniversary of entry into of entry into the Option and Registration Rights Agreement ( Option ), the Asbestos Trust will have rights to purchase for $1.00, $20 million of EnPro Common Stock or under certain conditions, receive payment of $20 million in cash. (b) The commitments to specifically pledge collateral and enter into other related documents to document or ensure performance of financial commitments include the following: (i) (ii) (iii) Entry by Coltec, EnPro, and the Asbestos Trust into the Option; Entry into a Parent Guaranty (the Guaranty ) by EnPro of the Deferred Contribution, which would become effective on the Effective Date; Pledging of a possessory lien on or security interest in 50.1% of the equity interests of GST and Garrison pursuant to a Pledge Agreement, which secures the Guaranty and thereby payment of the Deferred Contribution. 4

5 Document Page 5 of In addition to the financial requirements of the Joint Plan, upon the Effective Date, Debtors will also be required to make payment pursuant to the Canadian Settlement. The Canadian Settlement requires a payment of $20 million on the fourth anniversary of the Effective Date of the Joint Plan. The Canadian Settlement permits an earlier payment in an amount calculated based on a discount rate of 4.5%. Should that payment be made on or around the Effective Date, the amount paid would be approximately $17 million. 15. As more fully explained below, EnPro and the relevant Debtors are in a sound financial position and will meet the foregoing commitments consistent with the requirements set forth in the Joint Plan. The Court should readily conclude that confirmation of the Joint Plan is not likely to be followed by the liquidation or the need for further financial reorganization of Debtors. The Companies Plans to Meet the Joint Plan Obligations 16. I first provide some background about the corporate relationships among EnPro, relevant affiliates, and Debtors as these relationships are important to explaining how Joint Plan obligations will be met. (Further details of these corporate relationships and how they have changed because of the Coltec Restructuring and how they will change on the Effective Date are provided in the Disclosure Statement.) 17. EnPro is the publicly traded entity that is the ultimate parent corporation of these companies. Presently, EnPro s sole immediate subsidiary is EnPro Holdings. EnPro Holdings, in turn, is the sole parent for several subsidiaries who themselves have subsidiaries in the broader corporate enterprise. When the Disclosure Statement was prepared, the parties expected EnPro Holdings to be named New Coltec, Inc., and it, indeed, initially had that name. The name has since been changed to EnPro Holdings, Inc. 5

6 Document Page 6 of EnPro Holdings is the parent of Debtors OldCo; GST; and Garrison. OldCo is the successor by merger to Coltec Industries Inc and is referred to in the Joint Plan as Coltec, even though its corporate name is OldCo, LLC. (See footnote 1, above.) 19. Pursuant to Section 7.10 of the Joint Plan, Coltec viz., OldCo will be merged into EnPro Holdings on the Effective Date of the Joint Plan, with EnPro Holdings as the survivor of the merger. Consequently, the obligations of Coltec under the Joint Plan prior to the Effective Date will be carried out by the current entity, OldCo, and the obligations of Coltec after the Effective Date will be carried out by the merged entity, EnPro Holdings. Debtors and EnPro s Plans to Meet Joint Plan Obligations 20. Since GST, Garrison, and Anchor filed their chapter 11 petitions, they have been deconsolidated from EnPro s financial reporting process. Likewise, OldCo has been segregated from the EnPro financial reporting process since its chapter 11 petition was filed earlier this year. As depicted in the following, GST, OldCo, and EnPro now hold significant cash or cash equivalents and have access to additional capital that will allow them to meet their obligations under the Joint Plan. Specifically: (a) As of March 31, 2017, GST held approximately $63.5 million in cash and approximately $250 million in bond investments. (b) As of March 31, 2017, OldCo held approximately $4.8 million in cash. (c) As of March 31, 2017, EnPro held approximately $113.7 million in cash and cash equivalents. Additionally, EnPro has a $300 million Revolving Credit Facility (of which approximately $263 million in borrowings was available as of March 31, 2017) should it desire to make borrowings to make payments required by the Joint Plan. 21. EnPro has sought and obtained approval from lenders as necessary to effect the Coltec Restructuring described in the Disclosure Statement and to ensure that capital from the Revolving Credit Facility will be available to meet financial obligations of the Joint Plan. 6

7 Document Page 7 of Obligations at Consummation of the Plan. As noted above, under the Joint Plan, there exist two financial obligations of Debtors under the Joint Plan that must be met on the day preceding the Effective Date. GST must make a $370 million cash contribution to the Asbestos Trust, and Coltec must make a $30 million cash contribution to the Asbestos Trust. 23. EnPro and Debtors plan to fund this $400 million in total payments using cash on hand at GST and OldCo. To the extent additional cash is required for either entity to make the required payment, EnPro Holdings will make additional capital contributions to GST or OldCo, as the case may be, using cash held by EnPro or cash from borrowings from EnPro s Revolving Credit Facility and contributed to those entities as capital. 24. Should Debtors decide to fund the payment to Provincial Boards for the Canadian Settlement at or about the same time, they will likewise use cash of GST on hand located in Canada (in GST s subsidiary), supplemented by parent-entity capital contributions from cash held by parents or borrowings under the Revolving Credit Facility. 25. If, for any reason, these sources of funds are inadequate, EnPro believes it has the means to access additional capital from other sources either through the Revolving Credit Facility (or amended facility) or by pursuing other capital sources to meet the obligations under the Joint Plan. 26. Obligations Approximately One Year After Consummation of the Plan. EnPro and Debtors will also be able to fully meet their obligations arising approximately one year after the Effective Date in a similar way. 27. As noted above, no later than the one year anniversary of the Effective Date, EnPro Holdings (as successor to OldCo following the merger on the Effective Date) must make payment of the $60 million Deferred Contribution to the Asbestos Trust. Given the current 7

8 Document Page 8 of 9 financial status of EnPro and its subsidiaries, as well as EnPro s reasonable business expectations, EnPro Holdings (and if necessary, EnPro) will make the Deferred Contribution on the date it is due. EnPro and EnPro Holdings expect to use cash and cash equivalents then on hand and, if necessary, make additional borrowings under the then-existing Revolving Credit Facility to obtain any additional funds necessary to meet this obligation. 28. Additionally, the Asbestos Trust holds rights under the Option, which would require the delivery of $20 million in shares of EnPro Common Stock or the payment of $20 million in cash, depending on which rights are exercised, as early as one year after the Effective Date (and, if the Option is terminated, and a cash payment made, as late as approximately two years after the Effective Date). Irrespective of whether the Asbestos Trust seeks delivery of EnPro Common Stock or cash, EnPro and EnPro Holdings will be able to timely meet these obligations. EnPro will be in a position to cause sufficient stock to be issued to EnPro Holdings for further transfer to the Asbestos Trust and EnPro Holdings and, if necessary, EnPro, will use cash or cash equivalents to make payment. Should additional cash be required, EnPro will be in a position to obtain and transfer such cash through borrowings from the Revolving Credit Facility or other means. 29. Because EnPro, EnPro Holdings, and subsidiaries will meet their financial obligations under the Joint Plan, the Court should conclude that confirmation of the Joint Plan is not likely to be followed by the liquidation or the need for further financial reorganization of Debtors, as required for confirmation under 11 U.S.C. 1129(a)(11). [Signature Next Page] 8

9 Document Page 9 of 9 * * * I, J. Milton Childress, do hereby state, under penalty of perjury, pursuant to 28 U.S.C. 1746, that the foregoing statements are true and correct. This 8th day of May, 2017 J. Milton Childress 9