$73.5-million shortfall would knock 30 per cent off payouts for retirees, salaried workers
For 1,200 pensioners and employees of pulp and paper giant Catalyst Paper, the battle underway in B.C. Supreme Court to restructure the company’s overwhelming debt load is not just about how much of a haircut Catalyst’s New York bondholders will take.
It’s about their own retirement and the money they’ve paid into a pension plan that could become a casualty of a bitter restructuring fight.
The pensioners were salaried employees. And a $73.5-million liability in their pension plan may not be honoured, according to documents filed in court. Catalyst is attempting to restructure a debt of more than $800 million under the federal Companies’ Creditors Arrangement Act.
The pension liability was about $40 million in 2003, and by 2010, when the dust had settled after the financial crisis, it had grown to $73.5 million.
That potential pension shortfall is considered an unsecured debt and is far down the list of priorities that has bondholders scrapping with one another to see who will squeeze the most from a pulp and paper company in an industry that is on its knees. The plan is also specifically exempted from a proposed sales agreement filed in the court between Catalyst and its secured creditors.
Catalyst’s retirees have come face to face with just how uncertain Canadian pensions can be if their employer runs into financial trouble…….
…Ari Kaplan, of the Toronto law firm Koskie Minsky, is representing the pensioners in B.C. Supreme Court. He said many of the pensioners will be forced to rely on more social benefits if their pensions are cut.
“When pensions are under-funded and wound up in a deficit, and people in their 70s and 80s are taking cuts to their pensions, what economist upon economist tells us is that that will result in a greater use of the health care system in the province; a greater burden on social benefits.
“It would shift the burden from the company to the taxpayers.”