U.S. Agency May Press for Trial : Judge Won’t Force LTV to Reassume Pensions

A federal judge ruled Wednesday that a government agency can’t force the financially ailing LTV Corp. to reassume more than $2 billion in pension obligations simply because a new labor contract restored previously cut benefits.

“Since the agency’s decision is not sustainable on the administrative record, the appropriate remedy is to vacate the restoration decision (giving back responsibility for the pensions to LTV),” ruled U.S. District Judge Robert W. Sweet, sitting in New York.

But Sweet also found that, while the federal Pension Benefit Guaranty Corp. hasn’t proved on the administrative record that LTV should take back the plans, the agency might be able to do so at trial and sent the issue back to the PBGC “for further consideration.”

Separately, a U.S. Bankruptcy Court in New York approved the sale of subsidiary LTV Steel Co.’s Warren Works to Renco Group Inc. despite an apparent higher cash bid offered by BMAC Corp., a California company. The offer from Renco Group included about $112 million in cash, a $30-million promissory note and $5 million in assumed liabilities.

LTV, a giant steel, aerospace and energy company, filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code in July, 1986.

Sweet also said LTV wasn’t entitled to block the move restoring its pension obligations simply because it is in Chapter 11 proceedings and denied the company’s request for an order enforcing an automatic stay of the pension plan restoration.

The PBGC, which insures the pensions of 30 million U.S. workers, took over LTV’s steel industry pension plans last January after the company terminated them. The plans were $2 billion in debt, making the PBGC LTV’s largest creditor.

But when a new LTV labor contract restored to workers some benefits previously cut, the agency claimed that the company was taking unfair advantage of federal funds to cut costs and gain labor peace.

“There is no factual or legal basis for the PBGC’s finding that LTV has abused the pension termination insurance program,” Sweet said in a 126-page opinion, adding that the court record “is not sufficiently developed to permit a finding that LTV Steel’s financial condition has improved to the point where it can afford to sponsor its previously terminated plans.”

LTV, the nation’s No. 2 steelmaker, claims that restoring the plans and their deficit will seriously hamper its ability to reorganize and emerge from bankruptcy proceedings.