The Pension Benefit Guaranty Corp., a Federal agency charged with insuring and managing pension funds, has alleged that Sun Capital Partners fraudulently transferred equity in the Friendly’s ice cream chain just prior to its October Chapter 11 filing.
What’s more, the agency says a Sun affiliate is using the equity in a bid to acquire the chain in its bankruptcy auction scheduled for December 22, 2011.
If successful, Sun would be able to shed more than $100MM in pension liabilities, while any other bidders for the brand would be stuck with the liabilities and essentially no assets (court records show $76.4MM in assets, $181.4MM in liabilities, and $105MM in underfunding according to this article in the Boston Globe). What’s more, the PBGC would be on the hook (via the American taxpayer) for the pension obligations.
Hey, nice move if Sun can get away with it.
Not surprisingly, Sun denies the charges, claiming any transfer involved debt, or a subordinated note, and not equity. Those with no dog in the fight say the transfer, just days before the Massachusetts-based chain went insolvent, is likely to stir a fight in court. Stay tuned.
We are proud members of the International Licensing Industry Merchandisers Association (LIMA), the recognized, authoritative voice of the licensing industry.