When Freedom Communications Inc., parent company of the Orange County Register, filed for bankruptcy last week it revealed that among the debtors queuing up in line for the assets are pensioners at the newspaper.
Former owner Aaron Kushner apparently did not make mandatory payments of $15.5 million to the pension fund and it doesn’t look certain that the government is going to bail out retirees and current employees. The Pension Benefit Guaranty Corporation (PBGC) has been on the case since August 2014, according to Gustavo Arellano at the OC Weekly, and fulfilling its charge to protect workers’ money by filing notices of liens on their behalf.
But Arellano repurposed a Facebook posting from a former employee to a private Register group that warned of danger:
“Hey friends in the Freedom pension plan. Things are not good in this BK. I'm afraid the Pension Benefit Guaranty Corp., the government agency that is supposed to protect our benefits, is happy to settle for less—a lot less—so that it doesn't have to take over the pension. Our pensions could be cut substantially—I'm told as much as 25 percent to 50 percent and that includes people currently collecting pensions.”
Freedom was inspired to file for bankruptcy after an aggressive expansion plan imploded and cost the company $40 million. Interested suitors include Tribune Publishing, Santa Ana developer Mike Harrah, Silver Point Capital LP and Digital First Media, parent of the Los Angeles Daily News.
Register reporter Jonathan Lansner wrote that pension obligations will be one of the largest considerations in crafting a bankruptcy deal. Freedom attorney Bill Lobel told him if the pension liabilities got sloughed off on the PBGC, the agency’s debt claim would wipe out all the unsecured creditors.
That’s because the unfunded liability of the pension, frozen in 2005, is a surprisingly high $155 million. The Wall Street Journal said that, according to the U.S. Department of Labor, the pension had assets of $287.3 million and 5,300 participants as of December 2014.
The Journal calculated that a 65-year-old retiree with 10 years of service, at $80,000 a year, would collect what might appear to some to be a satanic pension of $666 a month.
Rich Mirman, Freedom chief executive, publisher of the Register and ally of Harrah, promised the staff in a letter when the bankruptcy was announced that full retirement benefits would be paid. But that was before it appeared there would be multiple suitors, not just Harrah and Mirman.
The company is said to be looking to shed $100 million in debt.