Bethlehem takeover put under risk due to pension takeover

Bethlehem takeover put under risk due to pension takeover

International Steel Group (ISG), considering a takeover of the Pennsylvania based US steelmaker Bethlehem Steel, is in the phase of feasibility studies of such takeover prior to making an offer and is granted time until January 6, 2003 according to the exclusivity agreement between the two companies. However, the US Pension Benefit Guaranty Corp.(PBGC), Bethlehem's largest creditor announced to take action on Monday which came in as surprising news as all parties involved expected it to happen after negotiations to reduce the labor force. With such takeover action of the severely underfunded pension plan of Bethlehem Steel, the PBGC is seen to make it more difficult for the consolidation of the steel companies. PBGC's decision is to terminate the pension plan and to take over the benefit payments of the 95'000 workers and retirees around the country. Total liabilities amount to $ 7.8 billion and the plan is underfunded by $ 4.3 billion. At this stage the pension issue will have to be settled with the union prior to any agreement of a possible merger. Since the process of 60 day exclusive exploration is ongoing between ISG and Bethlehem, and ISG is seeking to purchase Bethlehem's assets without assuming its liabilities, such federal takeover is putting the deal under great risk. However, Bethlehem still has the right to challenge this termination by PBGC and currently is reported to be evaluating that option. Bethlehem Steel Corp. chief Steve Miller says he hopes to persuade the federal agency to delay a takeover of its pension plan for sometime.