NEW YORK, SEPT. 24 -- The federal Pension Benefit Guaranty Corp. filed suit today to force its $2 billion battle with the financially troubled LTV Corp. out of U.S. Bankruptcy Court.
The action came a day after LTV, which is reorganizing under Chapter 11 proceedings, won a bankruptcy court order in Manhattan against the PBGC.
LTV is trying to overturn the federal pension agency's decision to return responsibility for three ailing LTV pension plans to the Dallas-based steel, energy and aerospace concern.
On Wednesday, LTV got U.S. Bankruptcy Judge Burton Lifland to set an Oct. 14 hearing on why the PBGC should not be held in contempt for allegedly violating Bankruptcy Code rules by returning control of the underfunded pension plans.
But the PBGC, which insures the pension plans of about 40 million American workers, got U.S. District Judge Robert Sweet to schedule an Oct. 1 hearing on why the dispute should not be moved out of bankruptcy court.
The PBGC took over LTV's steel industry pension plans last January after the company terminated them. The plans were $2 billion in debt, making the PBGC LTV's largest creditor. But when a new LTV labor contract restored benefits previously cut, the agency contended that it was being forced to pay for pension plans that, in effect, had not been terminated.
LTV argues that restoring the plans and their deficit will seriously hamper its ability to reorganize and emerge from bankruptcy proceedings.
At issue is whether the PBGC, in handing the pension plans back to LTV, violated the automatic stay provision of the Bankruptcy Code, which bars actions against debtor companies at the expense of other creditors.
LTV filed for bankruptcy law protection in 1986