The Pension Benefit Guaranty Corporation (PBGC) announced December 30 it will pay retirement benefits for more than 2,700 current and future retirees at Walter Energy Inc., a producer and exporter of coal based in Birmingham, Alabama.
The agency is stepping in because Walter Energy plans to sell the majority of its assets in bankruptcy proceedings and the potential buyers have signaled they will not assume the pension plan. Walter Energy sponsors the Pension Plan for Salaried Employees of Walter Energy Inc. Subsidiaries, Divisions and Affiliates, which will ended December 31, 2015.
According to PBGC estimates, the plan for salaried employees is 70% funded, with $219 million in assets to cover $314 million in benefits. The agency is expected to cover the entire $96 million shortfall.
Walter Energy is the largest U.S.-based producer of coking coal used to make steel, according to the PBGC announcement. The company and 22 of its subsidiaries and affiliates sought Chapter 11 protection in July 2015. The filing was spurred by a drop in coal prices and an increased debt load from the purchase of Vancouver-based Western Coal Corp. An auction for the company’s assets is scheduled for early January.
Two days before the PBGC’s announcement, the U.S. Bankruptcy Court for the Northern District of Alabama issued an opinion and order granting Walter Energy’s request to reject collective bargaining agreements, implement final labor proposals, and terminate retiree benefits.This will affect the United Mine Workers of America Health and Retirement Fund, which has been declared by the Department of Labor to be in critical status.