Tower Automotive creditors committee appeals approval of retiree settlements

By Caroline Salls

Pittsburgh, June 1 - Tower Automotive Inc.'s official committee of unsecured creditors appealed the court approval of settlements with two current and future retiree groups that modify retiree health care benefits, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The settlements, which were approved on May 22, cover retired salaried employees as well as current and future retirees of the company's recently closed Milwaukee facility.

Under an agreement with the official committee of retirees, Tower will continue its current benefit payments to salaried retirees through June 30.

The retiree committee will establish a Voluntary Employee Benefits Association (VEBA) trust to administer future benefits, and Tower will make a cash payment to the VEBA on July 1 and another payment in cash and/or equity when the company emerges from Chapter 11, for a total payment of $5 million.

If Tower's reorganization is not complete by July 1, the company will make supplemental cash payments to the VEBA until the reorganization is complete.

In addition, life insurance for retirees will continue at the current benefit levels.

Under the agreement with unions representing employees and retirees at Tower's Milwaukee manufacturing facility, the company will continue current benefit payments through June 30.

A separate VEBA will administer benefits for current and future Milwaukee retirees beginning July 1, and the company will contribute about $30 million in equity in the reorganized company to the VEBA when it emerges from bankruptcy.

The Milwaukee location closed last month.

The official committee of unsecured creditors had objected to the settlements, saying the company is seeking court ratification of deals recently cut with the closed Milwaukee facility unions and retiree committee that seek to favor one class of creditors, retirees, at the expense of other unsecured creditors.

Also, the committee said the proposed settlements attempt to dictate elements of the terms of a future plan of reorganization and are thus impermissible under bankruptcy law.

In his opinion, judge Allan L. Gropper said the settlements do not discriminate against any creditors and do not dictate terms of a plan of reorganization.

The Novi, Mich.-based auto parts maker filed for bankruptcy on Feb. 1, 2005. Its Chapter 11 case number is 05-10578.

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