Agency to Rescue Milacron Pensions


The Pension Benefit Guaranty Corp. wants to take over the underfunded pension plan covering about 8,400 employees and retirees of Milacron Inc., which filed for Chapter 11 bankruptcy in the United States and Canada in March.

The Washington, D.C.-based PBGC on June 10 estimated that the Milacron retirement plan is 45 percent funded, with $260 million in assets to cover $573 million in benefit liabilities. The agency expects to be liable for about $285 million of the $313 million shortfall. The pension plan has been frozen since Dec. 31, 2007, according to the agency.

In early May, Milacron agreed to sell its assets for $175 million to a group consisting primarily of current investors. The prospective buyer is a company formed by Avenue Capital Group, DDJ Capital Management LLC and certain other entities that hold about 93 percent of Milacrons senior secure notes. If no other qualified bids are received by June 24, Milacron has said it will request bankruptcy court approval of the sale June 26.

According to bankruptcy court documents, under the restructuring support agreement, the liabilities for Milacrons employees under the pension plan will not be assumed and continued by the purchaser of Milacrons assets.

The PBGC said it will take over the pension plan assets and use insurance funds to pay guaranteed benefits earned under the Milacron retirement plan. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, the agency stated, and other workers will receive their pensions when they are eligible to retire.

Until the agency becomes trustee of the pension plan, the plan will remain ongoing under company sponsorship. PBGC spokesman Gary Pastorius told Lube Report yesterday that the PBGC had not yet become trustee of the pension plan, and that the issue remained in court proceedings, with no specific timetable.

The agency said it will notify all plan participants when it becomes trustee. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2009 is $54,000 per year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, the agency said, certain early retirement subsidies and benefits increases made within the past five years may not be fully guaranteed.

Milacron said details of the retirement plan takeover must still be finalized, andacompany official declined to comment further about the PBGC announcement.

PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in more than 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.

Milacrons Industrial Fluids segment supplies metalworking and industrial fluids; the companys larger business supplies plastics-processing technologies.

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