SCIENCE/TECHNOLOGY : Pentagon Reduces Its Pension Claim Against Loral Corp.
The Pentagon has reduced an earlier estimate and now claims that Loral Corp. owes it $133 million from the overfunded pension plan of Newport Beach-based Ford Aerospace Corp., which Loral, a New York-based defense contractor, purchased 11 months ago.
The pension dispute arose when Loral allowed Ford Motor Co. to keep Ford Aerospace’s $213.3 million in excess pension assets as part of the purchase price for Ford Aerospace. That transaction helped Loral to beat out other bidders for the aerospace unit, which makes missiles, satellites and a variety of other defense electronics equipment.
The Defense Logistics Agency, which oversees Pentagon contracts, notified Loral in December that it owed $178.3 million of the excess pension assets. The claim stemmed from numerous defense contracts won by Ford that earmarked government funds for the pension plan.
In a filing with the Securities and Exchange Commission in June, Loral said Pentagon negotiators had “orally advised” it in settlement negotiations that the government believes that it is entitled to $133 million instead of the original $178.3 million claim. An agency spokeswoman confirmed that the government had revised its claim.
Loral said it still contests the revised claim and that the government action ultimately will have no material effect on the company. But for the first time the company acknowledged in the filing that it has taken a reserve against earnings as a contingency in case the Pentagon wins the dispute. Elizabeth Allen, a Loral spokeswoman, said the company will not disclose the amount of the reserve.
If the government is successful, Loral would pay between $73 million and $124 million, depending on whether Shearson Lehman Hutton, its partner, chooses to make a payment in proportion to its equity ownership of Ford Aerospace, now called Loral Aerospace. Another Loral partnership, which owns the satellite subsidiary of Ford Aerospace, would be liable for the $9-million balance.
