The ruling by Judge Jerry Venters, will affect 1,400 to 1,500 retirees and approximately 1,000 current employees, who will see the Pension Benefit Guaranty Corporation (PBGC) assume control of the company’s pension plans.
In the ruling, Venters said the company faced the potential of liquidation, meaning the loss of approximately 680 jobs, without the elimination of the pension plans.
“The court is firmly convinced that the debtor cannot reorganize in Chapter 11 and cannot continue to operate outside of Chapter 11 unless the retirement plans are terminated,” the judge said in his opinion. “The only reasonable alternative would be liquidation, in which case unsecured creditors would likely receive nothing.”
Wire Rope’s pension plans, covering salaried, hourly and union employees, are underfunded somewhere between $6.3 million to $37 million. Officials from the company said that kind of pension obligation would make securing $10 million in equity investment and $35 million in long-term debt financing, needed to successfully emerge from bankruptcy, very difficult.
Officials from the PBGC said most retirees should continue to receive their regular benefits once the agency takes over the plans in the next two to three months.
“Their benefits are safe,” said PBGC spokesman Gary Pastorius. “For the plans we take over, about 94% of the people get their full benefits. The first thing we do is make sure no one missed a payment.”
The PBGC guarantees maximum benefits of $43,977.24 a year. However, changes made to pension plans in the last five year are not always guaranteed by the agency, meaning those who recently took early retirement incentives could see a reduction in their current benefits.