STOCK MARKET WATCH - Wednesday, 1 February 2012

[DemReadingDU]

101. PBGC preps for possible AMR pension takeover with liens

2/1/12 PBGC preps for possible AMR pension takeover with liens
The Pension Benefit Guaranty Corp. has filed 76 liens against the assets of American Airlines parent AMR Corp., Joshua Gotbaum, PBGC director, said at a news briefing Tuesday.

Braced for the possibility that the agency will have to assume responsibility for some of the airline’s pension plans as part of Fort Worth, Texas-based AMR’s Chapter 11 bankruptcy reorganization, PBGC officials filed the liens after American made $6.5 million of a $100 million required pension contribution due Jan 15.

At the time, company officials said that paying less than the full amount would allow it to preserve cash needed to reorganize.

The liens, filed Jan. 19-20 in courts in Texas, Delaware and the District of Columbia, seek $91.68 million from assets in the United States, Bermuda, Colombia, Dominican Republic, Mexico, St. Lucia and Venezuela.

Those assets are not part of the Chapter 11 case.

PBGC officials said at a news briefing Tuesday that filing liens is a common legal tool they use when full contributions are not made as scheduled. Mr. Gotbaum said that AMR had sought and gained approval from the U.S. Bankruptcy Court in New York to make the full $100 million contribution.

Mr. Gotbaum said the agency is prepared to target other assets if American misses another $100 million payment that is due April 15.

According to PBGC estimates, taking over all four plans—for pilots, flight attendants, agents and ground crew—would add nearly $9 billion to the agency’s deficit, based on the level of underfunding in the plans. The plans have a combined $8.3 billion in assets and $18.5 billion in liabilities, not all of which would be guaranteed by the PBGC, if the agency takes over the plans.

To recoup its possible loss, “There is a different set of actions,” Mr. Gotbaum said. He declined to discuss the agency’s possible tactics during bankruptcy proceedings, but said: “We want American Airlines to be able to reorganize successfully and succeed as a business. However, we would like it to succeed as a business without killing its pension plans.”


http://www.businessinsurance.com/article/20120131/NEWS03/120139971?tags=|62|307|77|82