Posts Tagged ‘Alicia McCarthy’

PBGC Initiates Pension Plan Termination in Leveraged Acquisition

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 19, 2013 at 9:32 am
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Editor’s Note: The following post comes to us from Lawrence K. Cagney, partner and chair of the Executive Compensation & Employee Benefits Group at Debevoise & Plimpton LLP, and is based on a Debevoise & Plimpton client update by Mr. Cagney, Jonathan F. Lewis, Elizabeth Pagel Serebransky, Alicia C. McCarthy, and Charles E. Wachsstock.

Buyers and sellers in typical leveraged buyouts of subsidiaries and divisions have long recognized that the Pension Benefit Guaranty Corporation (“PBGC”) could perceive its own interests as threatened in the transaction and, consequently, might choose to interfere with the parties’ bargain. This concern has to date been viewed as largely theoretical, as the PBGC typically either does not appear in a transaction at all, or, if it does appear, extracts relatively modest protections from the parties. Two recent developments suggest that the PBGC intends to become more active in buyout transactions:

  • In April, the PBGC initiated proceedings to terminate a pension plan in connection with Compagnie de Saint-Gobain’s sale of its US metal and glass containers business to Ardagh Group. Initiation of a plan termination is typically viewed as an attempt to scuttle a transaction.
  • In a recent interview, a senior PBGC official announced that the PBGC intends to become more aggressive in scrutinizing future buyout transactions and to allocate more of its resources in this area.

…continue reading: PBGC Initiates Pension Plan Termination in Leveraged Acquisition

Court Rejects ERISA Challenge to Pension De-Risking Transaction

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday January 12, 2013 at 9:24 am
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Editor’s Note: The following post comes to us from Nicholas F. Potter, corporate partner at Debevoise & Plimpton LLP, and is based on a Debevoise & Plimpton client update by Mr. Potter, Sarah A.W. Fitts, Jonathan F. Lewis, Edwin G. Schallert, Alicia C. McCarthy, and Vincent J. Bianco.

For many employers, underfunded defined benefit pension plans present significant ongoing challenges. These challenges arise not only because of the underfunding itself, but also because of the significant volatility that the underfunding can create on its balance sheet due to changes in interest rates and other key assumptions over time. An employer has always had the ability to seek to improve its longer-term financial profile by “de-risking” its pension plan through the purchase of an annuity from a suitable annuity provider that commits to pay benefits to plan participants without further financial support from the employer. The transfer of pension obligations in this manner, which may include the termination or partial termination of the pension plan, can significantly improve an employer’s financial profile. De-risking transactions have become more prominent in recent months because of two transformative transactions, one involving General Motors and the other involving Verizon. We are pleased to report that the first judicial test of these transactions in court under ERISA, the Federal benefits statute, has resulted in a victory for the parties involved in the transaction. And, while the decision was based only on a request for preliminary injunctive relief, and while future litigation will be based on the manner in which future de-risking transactions are structured (including on the key issue of annuity provider selection and suitability), the decision validates the central thesis of pension de-risking and provides an important and helpful roadmap through some of the potential ERISA challenges to these transactions.

…continue reading: Court Rejects ERISA Challenge to Pension De-Risking Transaction

 
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