Tower Automotive gets court OK of three amended retiree benefits agreements

By Reshmi Basu

New York, June 28 - Tower Automotive, Inc. obtained court approval of amended retiree benefit agreements with its Milwaukee facility unions, the official committee of retired employees and some union retirees, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

The agreements are a "reflection of negotiations from the time the parties filed a plan," and "resolves literally hundreds of claims filed by retirees," Tower's attorney, Anup Sathy of Kirkland & Ellis LLP, told the court.

Noting that there were no objections filed to the modified plan, judge Allan L. Gropper approved the "reasonable" settlement, commenting on how complicated the matter was "in view of the very difficult economic issues the debtor faces."

He also said the settlement "would come with a degree of hardship" but there was no other way to move forward, adding that the "economic realities had driven the result."

As previously reported, under the agreements, the official committee of unsecured creditors' appeal of approval of an initial Milwaukee union agreement and an initial retiree agreement will be withdrawn.

Milwaukee agreement

Under the Milwaukee agreement:

• Tower will make a $1.47 million payment to the Milwaukee Voluntary Employee Benefits Association trust before July 1; TA Acquisition Co., LLC (TAAC) will make a $1.47 million payment to the VEBA trust by Oct. 1 and subsequent $1 million payments on the VEBA trust on Jan. 1, 2008, July 1, 2008 and Oct. 1, 2008;

• The company will pay the Medicare Part B benefit to eligible retirees until Dec. 31, 2008;

• Life insurance coverage will be reduced to the lowest possible coverage under the current retiree life insurance program;

• The Milwaukee unions will have a $133.27 million general unsecured claim against R.J. Tower Corp. and $133.27 million of general unsecured claims against Tower Products and Tower Milwaukee; and

• On the plan of reorganization effective date, TAAC will assume the Milwaukee pension plan;

• A $3.5 million contractual severance benefits claim must be paid within four days of court approval of the agreement.

Retiree agreement

Under the amended retiree committee agreement:

• Tower will make an $80,000 payment to the retiree Voluntary Employee Benefits Association trust before July 1; and TAAC will make 16 payments to the retiree VEBA totaling $4.8 million beginning on the plan effective date;

• Life insurance coverage will be reduced to the lowest possible coverage under the current retiree life insurance program; and

• The retirees represented by the retiree committee will have a $16.06 million general unsecured claim against R.J. Tower.

Kalamazoo, other agreements

Under the agreement covering union retirees from Tower's former Kalamazoo, Mich., facility, Active Tool & Manufacturing Co. Inc., Masco Tech facility and Greenville, Mich., facility:

• TAAC will pay $800,000 to the Greenville VEBA and $166,666 to a United Auto Workers trust on the plan effective date, as well as $80,000 payments to the Greenville VEBA on the first and second anniversary of the effective date and $166,666 payments to the UAW trust on the six-month and one-year anniversaries of the effective date;

• Life insurance coverage will be reduced to the lowest possible coverage under the current retiree life insurance program;

• Greenville retirees will have a $12 million general unsecured claim against R.J. Tower and a $12 million claim against R.J. Tower's operating subsidiaries; and

• The UAW will have a $2.5 million general unsecured claim against R.J. Tower and a $2.5 million claim against R.J. Tower's operating subsidiaries.

Tower, a 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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