The pension Trustees of the UK unit issued a statement Monday saying that the company was withdrawing its October offer to fund the pension fund with minimum contributions, according to Reuters. This could land the UK’s pension protection fund with a $777 million bill, according to the news agency.
“We’re disappointed with this turn of events, but will continue to work with all parties to seek a solution which is in the best interests of all members of the pension scheme,” the Trustees told Reuters. “Unfortunately Federal-Mogul has not felt able to do this in view of uncertainty about the new statutory regime to be brought in under the recently passed Pensions Act and has now withdrawn its offer to continue the pension scheme.”
The plan that was withdrawn could have brought both T&N and Federal-Mogul out of bankruptcy protection, which they entered in 2001 following huge asbestos claims. Most the claims stem from T&N, which Federal-Mogul acquired in 1988. Financier Carl Icahn had proposed putting up $25 million to fund the pension scheme with the goal of closing the deficit within 10 years.
What will happen now is unclear, according to Reuters, but UK consultant John Ralfe is quoted as saying that T&N will most likely be wound up and the proceeds will be given to both company pensioners and asbestos claimants. Ralfe estimates that the Pension Protection Fund, the UK’s version of America’s Pension Benefit Guaranty Corporation (PBGC), will be hit with a large tab when it opens its doors in April, according to Reuters.
The Trustees had previously rejected a plan to save the pension plan, citing the fact that the proposed plan did not treat all pensioners the same (See UK Pension Trustees Reject Rescue Proposal ). The plan previously rejected by the Trustees did not involve Icahn’s offer.