The government agency that took over an underfunded pension plan from Hardwick Clothes is denying that it pushed the Cleveland, Tenn., company into bankruptcy earlier this week.
The head of restructuring programs at the Pension Benefit Guaranty Corp. said the federal agency "provides a safety net for the country's privately run pensions, and we provided that service to Hardwick." Sanford Rich, chief of negotiations and restructuring for the PBGC, said a company report blaming the agency for the bankruptcy "isn't true."
The PBGC notified Hardwick last month that it would seek a tax lien on the company if Hardwick didn't work out a repayment plan for the $4.6 million underfunded retirement plan, which covers 644 workers and retirees for the 133-year-old clothing maker. Hardwick filed a petition for relief in bankruptcy court in Monday before it responded with any repayment offer, PBGC officials said.
In a statement earlier this week, Hardwick Clothes' CEO Tommy Hopper blamed the bankruptcy on the pension shortfall and PBGC's move to put a lien on the company to recover its debts for assuming the plan.
"The primary cause of the filing was the unexpected action of the Pension Benefit Guaranty Corp., in demanding immediate payment of liabilities related to Hardwick's terminated pension plan and PBGC's threat to file a lien on Hardwick's assets if immediate payment is not made," Hopper said.
In its filing for a Chapter 11 bankruptcy reorganization, Hardwick said it remains viable as a business but the company has more than $7 million in debt to PBGC for its unfunded pension liabilities and termination fees for ending the plan and turning it over to the government agency.
In most similar cases, PBGC works out a payment plan with the company terminating an underfunded defined benefit plan. But in Hardwick's case, the company filed bankruptcy before responding to the tax lien letter.
In the bankruptcy reorganization, PBGC's total debt of more than $7 million will be unsecured and have a lower priority for repayment than the company's secured debt.
Hopper said the company remains financial solvent, although it couldn't afford to absorb investment losses from its employee benefit plan during the Great Recession.
Rich said Hardwick's retirement plan had about $10.8 million in assets to cover $15.4 million in benefits and terminating the plan also incurred other fees and penalties.
"The company was well aware of this debt at the time we stepped in," Rich said. "During negotiations this fall, Hardwick had the opportunity to settle this debt. They didn't suggest a payment plan. So in late November, we told them that a $2.3 million lien would be filed against them in early December."
PBGC never actually placed the lien on the property.
"At PBGC we always work with companies to preserve both pensions and jobs, and to help companies avoid bankruptcy," Rich said in a statement. "Unfortunately, Hardwick wasn't willing to work with us. There's no reason that they should be allowed to shirk their legal responsibilities at the expense of other companies that pay us premiums."
Contact Dave Flessner at email@example.com or at 757-6340.
Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...