By Tom Hals
July 28 (Reuters) - Rust-Oleum paint maker RPM International Inc on Monday announced a $797.5 million deal to resolve asbestos claims against its Bondex International Inc unit, which filed for protection from creditors in 2010 after mounting personal injury lawsuits.
If the agreement receives court approval, it would end a contentious Chapter 11 bankruptcy in which a judge ruled Bondex should pay about $1.2 billion to resolve asbestos claims. Bondex, which had said it should only pay $135 million, was appealing the ruling.
RPM shares were up 2.8 percent at $45.64 in afternoon New York Stock Exchange trading.
Under the agreement, RPM will provide an initial $450 million in cash to a trust once the U.S. Bankruptcy Court and the U.S. District Court in Delaware approve a reorganization plan for Bondex.
RPM, which also makes DAP caulk, would contribute the remaining $347.5 million in cash, stock or a combination of the two within four years after the trust has been established.
All current and future asbestos claims against Bondex and related entities would then be channeled to the trust, according to a Monday statement by Medina, Ohio-based RPM.
Bondex and another RPM unit, Specialty Products Holding Co, filed for bankruptcy in May 2010 in the wake of lawsuits over its asbestos-containing products such as joint compound, which is used in filling drywall gaps.
Bondex and personal injury lawyers clashed over how much money was needed to fund a trust to resolve the asbestos claims.
The lawyers said $1.255 billion was an appropriate amount based on what Bondex paid in past settlements.
Bondex said its liability could not be determined by looking to past settlements because those deals included payments to rid itself of nuisance lawsuits. Without those nuisance payments, the company said, its asbestos liability would have been about $135 million.
Former U.S. Bankruptcy Court Judge Judith Fitzgerald rejected that argument. She retired shortly after issuing the opinion in May 2013, and Judge Peter Walsh is now overseeing the case.
Monday's agreement, if the courts approve it, would head off a federal appeals court's potentially binding ruling on Bondex's approach to estimating liability.
Asbestos is a naturally occurring mineral that can cause deadly cancers, including mesothelioma. Scores of companies have filed for bankruptcy and collectively paid tens of billions of dollars to set up trusts to resolve personal injury lawsuits involving asbestos.
RPM said it expected the contributions to the trust to be tax-deductible, and it estimated the after-tax net present value of its contributions at about $485 million.
The case is Special Products Holding Corp, U.S. Bankruptcy Court, District of Delaware, No. 10-11780.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Lisa Von Ahn)