Pamela A. MacLean
Leveraged buyout specialists at Sun Capital Partners face a battle with the federal pension insurers over its plan to abandon pension commitments to 6,000 workers and retirees at Friendly Ice Cream Corp. Friendly's is now under bankruptcy protection.
The Pension Benefit Guaranty Corp. said this week it would fight efforts by Sun Capital to end pensions for workers as part of the bankruptcy reorganization.
Sun Capital took over the Wilbraham, Mass. company in August 2007, for $395 million. With 490 company and franchised stores it serves ice cream and sandwiches along the East coast. But Friendly's filed for bankruptcy protection on Oct. 5. It plans to close 63 restaurants, according to court filings.
"It looks like Friendly's and Sun Capital are trying to make their employees and retirees bear the brunt of the company's restructuring; the employees deserve better," said PBGC Director Josh Gotbaum.
The 79-year-old chain has 10,000 employees spread over 15 states. If the bankruptcy court in Delaware allows Friendly's and its Sun Capital owners to abandon the pension plan, the PBGC, as an insurer, will pay benefits to Friendly's employees, but at a potentially reduced rate.
Many companies go through bankruptcy but keep their pensions going, according to Gotbaum.
The company will be sold at auction Dec. 1, with a Sun Capital affiliate as the lead bidder, according to a report by Bloomberg News and court filings.
The company reported debt of $297 million and assets of $100 million, according to the court.
Sun Capital is based in Boca Raton, Florida and owns restaurant operators including Boston Market, Seafood Kitchen, Fazoli's Restaurants and Chevys. The company leaders, Rodger R. Krouse and Marc J. Leder are co-CEOs and both former Lehman Brother's senior vice presidents before former Sun Partners in 1995.
PBGC protects pension benefits for 44 million Americans in 27,500 private-sector pension plans using insurance premiums paid by companies and not tax dollars.