Sara Lee on the hook for Twinkie-maker's pension fund shortfall
Sara Lee Corp. lost a court challenge to a U.S. pension agency ruling that it's partly responsible for a $60 million retirement fund shortfall caused by Interstate Bakeries Corp.'s bankruptcy.
The Pension Benefit Guaranty Corp. didn't act arbitrarily when it determined in 2006 that Sara Lee and five other bakery companies that had contributed to a joint retirement plan were liable for underfunded obligations to Interstate Bakeries workers, U.S. District Judge Henry Kennedy ruled yesterday in Washington.
Sara Lee, maker of frozen pound cakes and Jimmy Dean breakfast sausages, challenged the ruling, which reversed a 1979 agency finding that the fund was a collection of single-employer plans not subject to joint liability. The upshot is that $27 million held in the fund by Sara Lee may now go to paying the pensions of Interstate Bakeries retirees, court documents show.
Interstate Bakeries, maker of Wonder Bread and Hostess snack cakes, won bankruptcy court approval last year of a settlement with the PBGC, calling for the agency to get an approved unsecured claim of $17.5 million if its assessment of the joint plan was upheld by the district court. If Kennedy had agreed with Sara Lee, the PBGC claim in Interstate Bakeries's bankruptcy proceeding would have risen to $72.5 million.
Mike Cummins, a spokesman for Downers Grove-based Sara Lee, declined to comment today.
Sara Lee rose 16 cents to $12.41 at 1:12 p.m. in New York Stock Exchange composite trading. The shares have risen 27 percent this year. Interstate Bakeries exited bankruptcy in February as a closely held company.
The PBGC is a quasi-government corporation founded by Congress in 1974 and financed by company insurance premiums and investment returns. The agency now insures the pensions of more than 44 million U.S. workers.
The case is Sara Lee Corp. v. American Bakers Association Retirement Plan, 06-cv-819, U.S. District Court, District of Columbia (Washington). The bankruptcy case is In re Interstate Bakeries Corp., 04-45814, U.S. Bankruptcy Court, Western District of Missouri (Kansas City).