WASHINGTON - The Pension Benefit Guaranty Corp. reached an agreement with four companies controlled by Sam Zell's Great American Management and Investment Inc., Chicago, before the companies go public.
The agreement states the companies - called the Falcon Group - will remain liable for the underfunding of any of the other 10 GAMI-affiliated pension plans if they terminate in the next five years.
The PBGC estimates the GAMI pension plans are underfunded by more than $30 million.
The PBGC wanted to make sure benefits are protected because "Falcon and its subsidiaries account for most of GAMI's revenues and profits," an agency spokeswoman said.
The agreement can be extended if the parties agree.
PBGC Executive Director Martin Slate said the agency wanted to make sure the pension funds would not be slighted if Falcon Group left GAMI.
Currently, the Falcon Group and the other GAMI companies belong to a corporate-structured control group. Under pension law, companies that share at least 80% common ownership are responsible for pension underfunding at any of the other individual companies.
Had the public offering gone through without PBGC's intervention, GAMI would have been solely responsible for the underfunding of its own plans without the Falcon Group's help.
Earlier this year, the PBGC terminated two Schwinn Bicycle Co. pension plans, which had a $9 million unfunded liability. Another Zell investment - Zell Chilmark Fund L.P., Chicago - purchased Schwinn's assets in February 1993, after Schwinn filed for bankruptcy in 1992. But Zell Chilmark isn't responsible for the pension plans, because the partnership only purchased Schwinn's assets and not its stock (Pensions & Investments, Aug. 10).
The PBGC spokeswoman said the Schwinn termination had nothing to do with the agency's recent agreement with GAMI.