In its news release , the PBGC said WCI’s parent company, The Renco Group Inc. of New York City, “has cash substantially in excess of the â€¦ maximum termination liabilities” of the pension plan. The WCI plan is currently underfunded by $117 million (See WCI Bondholders Cleared to File Suit ). The PBGC has a claim against the assets of all Renco controlled-group companies.
By filing suit now to terminate the WCI pension plan, the PBGC matures its claim against the Renco controlled group for the pension shortfall and expects to achieve a full recovery, the release said. If the PBGC had waited until after the plan of reorganization was confirmed, the pension plan would have been abandoned to a liquidating corporate shell with no assets, the agency asserted The PBGC then could have been liable for $94 million of the $117 million shortfall, while workers and retirees would have forfeited up to $23 million in benefits not guaranteed by PBGC.
Meanwhile, the New York Times reports that the PBGC is prepared to lay claim to the assets of Ira Rennart, owner of Renco, including his 29 bedroom, $185 million, oceanfront estate in the Hamptons, outside New York City.
A similar tactic worked with Carl Icahn, who controlled Trans World Airlines when it filed for bankruptcy in 1992. The PBGC laid claim to Icahn’s holdings, including a racehorse and a beach house, according to the Times. As a result, Icahn agreed to pay $30 million a year for eight years to help cover the costs of the airline’s pensions.
Concerning the Rennart case, Carol Connor Flowe, a former general counsel for the PBGC, says “It’s especially a situation where they’re going to be aggressive because there looks to be quite a bit of value” in Rennart’s holdings.