The PBGC will take over the defined benefit plan of Wolverine Tube Inc., Huntsville, Ala., the agency announced Wednesday.
The decision was reached as a part of a Chapter 11 reorganization plan approved Tuesday by the U.S. Bankruptcy Court in Wilmington, Del., which ruled that “Wolverine could not continue in business unless PBGC took responsibility for the pensions,” a Pension Benefit Guaranty Corp. news release said. The move preserves both jobs and pensions that without intervention “would largely be lost,” said PBGC Director Joshua Gotbaum in the release.
The company’s pension plan has $106.3 million in assets to cover $190.4 million in liabilities; the PBGC will cover $79.6 million of the $84.1 million shortfall. In exchange, Wolverine Tube will give the PBGC a 5% equity stake in the company and pay an estimated $13 million in cash payments over 11 years, Wolverine President and CEO Harold Karp said in an interview.
Mr. Karp said the company froze its pension plan in 2006. The company, which manufactures heat transfer equipment for HVAC and refrigeration systems, filed for Chapter 11 bankruptcy protection in November 2010, and is now a privately held company with top secured noteholders swapping $139 million in debt for most of the stock. Chairman Steven S. Elbaum said in a Wolverine release that the company had paid all unsecured creditors in full, and restructured “with significantly reduced debt” that will allow it to meet its capital and capital investment needs.
