The PBGC objected to a request by United Airlines Inc. parent UAL Corp. to align some of its ancillary businesses separately from its core airline assets, according to court papers filed Friday with the U.S. Bankruptcy Court in Chicago, which is overseeing United's Chapter 11 bankruptcy case. The secondary "loyalty businesses" include UAL Loyalty Services Inc., MyPoints Inc. and Confetti Inc. UAL Loyalty Services runs United's Mileage Plus Program. UAL filed a motion March 4 with the U.S. Bankruptcy Court in Chicago seeking authority for the ancillary businesses to participate in a series of "inter-debtor" transactions.
Attorneys for the agency filed the objection as a preventative measure to avoid any reduction in the value of their $8.3 billion claim in the bankruptcy case, said PBGC spokesman Jeffrey Speicher. The potential impact of the UAL request on the PBGC's claim has not been determined, he said.
The court will consider the matter at a March 18 hearing.
Separately, the PBGC today proposed updating the method used to calculate the life expectancies of participants in terminated pension plans that it is going to take over. The proposed rule aims to match the cost of terminating a pension plan through the purchase of a group annuity in the private sector.
The result of the proposed rule would be that interest rates used to value terminated plans will be higher and, as a consequence, more in line with market interest rates, said a source who did not wish to be identified. "It may make it a little bit harder for people to challenge the PBGC valuations" of liabilities of terminated pension funds, he said.
The proposal also raises the question of whether the federal pension insurance agency should re-evaluate other pieces of its valuation regulation, in light of the debate over how fast pension plan sponsors should fund toward their termination liabilities, according to the source.