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Secured noteholders of WCI Steel are sponsoring a reorganization plan that would transfer its assets to a new company and put the assets of WCI's corporate parent beyond the reach of the PBGC.
Stephen Taub, CFO.com | US
February 6, 2006
The Pension Benefit Guaranty Corporation has sued the underfunded pension plan of WCI Steel Inc. of Warren, Ohio, in an attempt to hold its parent, The Renco Group Inc., responsible for the plan's obligations.
The WCI pension plan, which pays for the benefits of about 2,000 retirees and current employees, is $117 million underfunded, according to the PBGC.
The agency proceeded with its lawsuit, it added, because a bankruptcy court was scheduled on Monday to begin a confirmation hearing on a reorganization plan sponsored by the holders of the steelmaker's secured notes. If the plan were confirmed, stated the PBGC, it would transfer WCI's assets to a new company owned by the noteholders and put Renco's assets beyond the reach of the PBGC.
In a statement, the agency noted that according to a statement of facts filed in WCI's bankruptcy proceedings and agreed to by its corporate parent, "the Renco Controlled Group has cash substantially in excess of the maximum termination liabilities" of the pension plan.
"WCI's corporate parent has more than enough money to fill the hole in the pension plan," said PBGC executive director Bradley D. Belt, in a statement. "Renco should either assume responsibility for the plan or buy an annuity from a private insurer to cover all promised benefits. Our action today is designed to protect workers from lost benefits and the pension insurance program from an unnecessary claim."
The PBGC also stated that if the WCI plan remained underfunded, workers and retirees could lose as much as $23 million in benefits that not covered by the agency.
According to The New York Times, Gary M. Ford, a lawyer representing Renco on pension matters, said the company would not oppose the PBGC's action and that it agreed with the government's effort "to prevent a deliberate attempt by the noteholders to terminate the pension plan by putting it in an intolerably precarious circumstance."