PBGC/Amphenol Agree on Pension Plans Protection
FOR IMMEDIATE RELEASE
May 14, 1997
The Pension Benefit Guaranty Corporation (PBGC) and Amphenol Corporation today agreed that the company will provide security to protect underfunded pension plans covering 6,800 workers when Kohlberg Kravis Roberts & Co. (KKR), a leveraged buy-out firm, purchases over 75 percent of Amphenol's common stock.
Bank financing needed for the purchase of Amphenol will add significant debt to the company. PBGC estimates that Amphenol has $45 million of underfunding in eight pension plans, which have assets of $158 million and liabilities of $203 million.
"When companies structure acquisitions, they need to ensure that pension plans are protected in good times and bad. This agreement will provide workers and retirees with these needed protections," said PBGC Acting Executive Director John Seal.
The agreement will give PBGC a second interest, behind the banks, for up to $45 million in stock of Amphenol's foreign subsidiaries as security for the pension plans' unfunded liabilities. If the banks financing KKR's purchase determine later that more collateral is needed to secure their loan, the agreement provides that PBGC would also get more collateral for up to $45 million in pension plan underfunding.
With a security interest, PBGC is better able to recover on claims for the underfunding and protect against losses for workers in the event of a future problem. The agreement will be in effect for a minimum of five years, and will continue thereafter until the pension plans are fully funded or Amphenol debt obtains an investment grade rating.
The company, headquartered in Wallingford, CT, manufactures electronic connectors and coaxial cable at U.S. facilities in Virginia, Illinois, Connecticut, New York, Michigan, Arizona, and New Jersey.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by more than 42 million American workers and retirees participating in about 50,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.
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PBGC No. 97-28