Armstrong Flooring retirees could see loss of health and life insurance benefits | Local Business
Life and health insurance benefits for Armstrong Flooring Inc. retirees remain in jeopardy as the company moves through the Chapter 11 bankruptcy sale process.
On Friday, an attorney for Armstrong Flooring Inc. said in Delaware bankruptcy court that interested buyers of the company do not want to take on paying retiree health and life insurance benefits.
Ron Meisler, of Skadden, Arps, Slate, Meagher & Flom LLP, said that the “practical reality to date” is that all of the bidders that Armstrong Flooring has been in touch with have stated they do not want to assume the debt of retiree’s benefits.
East Lampeter Township-based Armstrong Flooring has said it wants to eliminate payments in health and life insurance plan obligations. The ongoing expenditures required under the retiree plans — nearly $245,000 per month — are cost-prohibitive given the company’s lack of cash and the constraints imposed by the budget under its financing, Armstrong Flooring argued.
There are about 1,660 retirees receiving health insurance benefits and about 2,000 receiving life insurance benefits. Meisler said the health benefits amount to about $15 million obligation and life insurance amount to $40 million obligation. Also, he said, there are $2 million to $3 million in annual administration expenses.
At Armstrong Flooring’s request, the court authorized the U.S. Trustee to appoint a committee of retirees that would negotiate with the company. The committee would include only nonunion retirees. The United Steelworkers union and International Association of Machinists and Aerospace Workers are representing their retirees in the matter.
Meisler said Armstrong Flooring is not closing the door on the possibility that a bidder might want to assume the debt. The deadline for bids is June 14 with an auction, if necessary, set for June 16. If the successful buyer doesn’t assume the debt, Armstrong Flooring would likely return to court to do away with or lessen the obligation, Meisler said.
Other matters discussed during the hearing regarding debtor-in-possession financing on Friday included payments to critical vendors and rental payments to High Properties. High Properties is the landlord for Armstrong Flooring’s headquarters at 1770 Hempstead Road in East Lampeter Township.
Armstrong Flooring is in the process of paying unpaid rent from prior to the May 8 bankruptcy filing. An attorney for the company said Armstrong Flooring had cut a check for about $213,000 for June’s rent and made payments on pre-petition rent.
Since Armstrong Flooring has said it might need to extend financing to July 7, High Properties sought to be sure rent for that time is also addressed. High Properties wanted to make sure those payments are in the debtor-in-possession budget.
Armstrong Flooring owes an estimated $318 million, including $160 million in long-term debt and sought protection from lenders through bankruptcy. It received court approval to sell off its assets it values at $517 million.
Armstrong Flooring is seeking to sell its North American, Chinese and Australian assets as going concerns, and bidders for each include going concern purchasers. A going concern means the company would continue to operate. The company acknowledged that there could be bidders who seek to liquidate its assets.
Armstrong operates seven manufacturing plants in three countries. Two plants are in Pennsylvania, one in Lancaster city and one in Beech Creek Township, Clinton County. There are plants in Illinois, Mississippi, Oklahoma and one plant each in China and Australia. The plants in China and Australia are not part of the bankruptcy but are part of the sale.
Last month, Armstrong notified all its workers that they could be permanently laid off before the end of this month if the company could not find a buyer interested in keeping it going.
Coming up on June 9 is the first meeting of the creditors’ committee, which will be held outside of the presence of a judge and run by a representative of the U.S. Trustee’s office. The meeting can be as short as 15 minutes. The purpose of a creditors’ committee is to ensure that unsecured creditors, who may be owed relatively small sums, are still represented in bankruptcy proceedings. The committee is appointed by the U.S. trustee and ordinarily consists of unsecured creditors who hold the seven largest unsecured claims against the debtor.