Harry & David Holdings Inc., Medford, Ore., on Monday won court approval to terminate its underfunded pension plan as part of a Chapter 11 bankruptcy reorganization.
The PBGC, which opposed the ruling by U.S. Bankruptcy Court Judge Mary Walrath in Wilmington, Del., said the termination was being undertaken “largely to increase investor returns, not out of necessity to emerge from bankruptcy,” and that it will consider filing an appeal.
If the PBGC decides not to appeal the decision and winds up taking over the plan, agency officials estimate it will pay $32.8 million of the $33.4 million unfunded amount now estimated.
When Harry & David filed for bankruptcy protection in March, the PBGC estimated it would have to assume $45 million in payments, with some retirees getting reduced pensions.
The company in March presented a creditors' agreement that required the company to cancel its pension plan. According to the PBGC release, the company claimed that its investors, including the private equity firm Wasserstein Partners, “are unwilling to finance the pensions.”
Harry & David's attorney, Brad B. Erens of the law firm Jones Day, said the firm was unable to discuss pending litigation, but the firm's website states that the firm helped negotiate a prearranged Chapter 11 plan with an ad hoc committee of its shareholders.
Calls to Harry & David and Wasserstein Partners were not returned.