Former Katy Industries requests approval to terminate retiree benefits

By Caroline Salls

Pittsburgh, Feb. 23 – KII Liquidating Inc., formerly Katy Industries, Inc., requested court approval to terminate retiree medical benefits for which the company makes an average monthly contribution of $7,500, according to a motion filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

KII said it has continued to provide the benefits after its bankruptcy filing while attempting to negotiate a settlement with a retiree committee in connection with a winddown resulting from the sale of substantially all of its assets.

The company said it made a settlement offer of $36,000 to the retiree committee in late August, which represented roughly five months of KII’s benefit contributions.

“Despite the debtors several attempts to obtain a response, six months after receiving the debtors’ settlement proposal, the retiree committee has yet to respond to the debtors’ offer,” the motion said.

In the meantime, the company said it has already paid more than $40,000 on account of the retiree benefits, or $4,000 more than the initial proposed settlement, and also worked with the retirees to transition their healthcare coverage from a self-funded health insurance plan to individual AARP medical plans.

“These payments have depleted the limited resources of the debtors’ estates and, without termination of the retiree benefits, will jeopardize the debtors’ ability to confirm and effectuate their Chapter 11 plan of liquidation, thereby imperiling potential distributions to the debtors’ unsecured creditors who, unlike the retirees, have not received a single penny on account of their claims,” the motion said.

In addition, KII said it does not have the ability to provide future retiree benefits.

A hearing is scheduled for March 12.

Katy, a St. Louis-based manufacturer, importer and distributor of commercial cleaning and consumer storage products, filed for bankruptcy on May 14, 2017. The Chapter 11 case number is 17-11101.

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