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Saturday, March 08, 2003

By Len Boselovic, Post-Gazette Staff Writer

In another sign the days of bankrupt Wheeling-Pittsburgh Steel may be numbered, the Pension Benefit Guaranty Corp. yesterday sought permission to terminate, or take over, the underfunded pension plan covering its workers. The moves comes a week after Wheeling-Pitt failed to win approval for a $250 million federally guaranteed loan the steelmaker says is crucial to its survival.

If a bankruptcy court judge approves the request, the PBGC -- already encumbered with paying billions of dollars of pension benefits to workers and retirees of failed steelmakers and airlines -- will avoid up to $378 million in additional liabilities for pension benefits Wheeling-Pitt workers would receive in the event of plant closings.

Wheeling-Pitt's application for the loan guarantee was unanimously rejected last week by the Emergency Steel Loan Guarantee Board, a government panel set up in 1999 to assist the ailing industry. After losing $226.5 million over the last two years, industry observers say Wheeling-Pitt doesn't have much time to come up with a Plan B.

If it fails and begins shutting down its mills in Pennsylvania, Ohio and West Virginia, court approval of the PBGC's' request would prevent steelworkers from qualifying for additional pension benefits they would receive in the event of plant closings. The PBGC -- a federal agency that insures benefits for roughly 44 million Americans and retirees in more than 32,500 company pension plans -- picks up the tab for those benefits if a shutdown occurs before its takeover of the pension plan. However, the benefits aren't covered if a shutdown occurs after the agency moves in. The agency is asking the court to make the termination effective as of yesterday.

The United Steelworkers of America, fighting the loss of benefits at two other bankrupt steelmakers where the agency wants to intervene, is objecting to what the agency wants to do at Wheeling-Pitt.

"Communities in the Ohio Valley are still reeling from the betrayal of the Bush Administration and now comes a blindside attack on their retirement security," said USW President Leo W. Gerard. "The Bush Administration's broken promises will not be forgotten in these communities."

As it is, PBGC estimates it will be on the hook for about $65 million of pension benefits payable to 9,400 workers and retirees, including about 5,200 from Wheeling-Pitt. The figure represents the maximum benefits the agency guarantees to workers and retirees, less the assets in the pension plan available to pay those benefits.

The plan is sponsored by WHX Corp., the New York holding company that owns Wheeling-Pitt and Handy & Harman, a Rye, N.Y. manufacturer. It also covers about 4,200 workers and retirees at Handy & Harman, PBGC spokesman Jeffrey Speicher said.

WHX said in November that it was unlikely Wheeling-Pitt would cease operations or that the guaranty agency would terminate the pension plan.

"We did not anticipate that the PBGC would take this action and had no advance notice of their announcement," James G. Bradley, Wheeling-Pitt's president and chief executive officer, said yesterday. "We believe this action was premature."

Bradley said the steelmaker will file an amended application with the loan guarantee board next week and that the agency's announcement will not affect day-to-day operations.

The guaranty agency takes over pension plans once a company is unable to pay the retirement benefits it has promised workers. That's happening more frequently because of the three-year decline of the stock market.

Since October 2001, the agency has taken on $8 billion in retirement obligations from the steel industry. The figure includes $1.85 billion from its takeover of LTV Steel's pension plan and $5.16 billion from its proposed terminations of Bethlehem Steel's and National Steel's plans.

If the court goes along, it will be the second time the agency has had to assume responsibility for retirement promises Wheeling-Pitt couldn't keep. The agency terminated a previous pension plan in 1986 when the steelmaker filed for bankruptcy. The price tag on that termination was $495 million. The steelmaker emerged from bankruptcy in 1991, but sought bankruptcy protection again in November 2000 after a wave of cheap imports battered the industry.

The PBGC decision culminates a dramatic reversal for the pension plan. It was fully funded in mid-1998 when WHX acquired Handy & Harman. That company's pension plan, which had a $155 million surplus, was combined with Wheeling-Pitt's pension plan, which had a deficit of $150 million. WHX said merging the two plans saved it the expense of having to put an estimated $135 million into the pension plan over the next four years.

Speicher said federal law did not require WHX to make pension fund contributions since then and the company hasn't made any. That left growth of the fund dependent on the stock market, which has lost about 40 percent since the bear market began in 2000.

By the PBGC's accounting, the WHX plan has assets of $300 million and liabilities of $443 million, including about $78 million in liabilities not guaranteed by the agency. PBGC pays a maximum annual benefit of $43,977 for persons in pension plans terminated this year and who retire at age 65.