The agreement comes on the heels of the PBGC’s promise to absorb the bankrupt Michigan-based company’s pension plan, which the agency estimates is 58% funded, with $253 million in assets to cover $434 million in liabilities (See PBGC Steps in Again ). The PBGC expects to be liable for about $161 million of the of the $181 million shortfall.
The PBGC said it was stepping in because Collins & Aikman missed $7.6 million in required contributions to the plan – which covers about 21,000 employees and retirees – and intends to abandon the plan when it sells all of its assets, as spelled out in its bankruptcy proceedings.
Under the $96 million settlement, the PBGC is supposed to receive an allowed administrative claim totaling $8.4 million that will be paid in cash on the day Collins & Aikman emerges from bankruptcy protection and will receive an allowed general unsecured claim of $87.8 million under the company’s Chapter 11 plan, the AP reported.
Collins & Aikman has been operating under Chapter 11 bankruptcy since May 2005, and is seeking approval of settlement with the PBGC, which plays a key role in the company’s plan to pay creditors, the company said Friday in court papers, according to the AP. The company said that the approval of the PBGC agreement by Judge Steven Rhodes of the Detroit bankruptcy court will guarantee the agency’s support of the Chapter 11 plan and will get rid of the possibility that the PBGC will place any liens on the company’s Canadian properties.
Collins & Aikman said the settlement calls for an involuntary termination of the pension plan as of March 31. Under this scenario the company doesn’t have to modify collective bargaining agreements with its unions to alter benefits members receive, according to the AP.