The PBGC will take over the pension plan of Corus Bankshares Inc., Chicago, and its subsidiary, Corus Bank, as part of a Chapter 11 bankruptcy reorganization approved this week by the U.S. Bankruptcy Court in Chicago.
The plan, now frozen, had $19.7 million in assets and $32.3 million in liabilities, according to a PBGC news release. The Pension Benefit Guaranty Corp. will cover the $12.6 million shortfall.
Corus Bank went into FDIC receivership in 2009 and filed for Chapter 11 in June 2010, following losses from a loan portfolio concentrated in condominium projects, PBGC spokesman Marc Hopkins said.
David Seligman, an attorney with law firm Kirkland & Ellis, which represents Corus Bankshares in the Chapter 11 case, said in an interview that freezing the pension plan was a condition of getting out of bankruptcy.
“The creditors will end up with equity in the reorganized company, and they didn’t want the reorganized company to pay for an employee base that is now a handful of people,” Mr. Seligman said.
PBGC is entitled to a share of the cash distribution that will be made to creditors in the coming weeks. The plan will continue under company sponsorship until PBGC notifies participants.
Calls to Corus Bankshares were not returned.