Saturday, March 31, 2001
The federal judge said that employee benefits were subject to availabilty of funds, and the company's net value is less than its debt.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- U.S. District Judge William T. Bodoh ruled late Friday that CSC Ltd. lenders cannot be forced to continue to pay health benefit costs for the mill's 2,960 employees and retirees.
Judge Bodoh's ruling will result in termination of health insurance, effective Tuesday, for 1,660 retirees and about 1,300 hourly workers, most of them already on furlough.
Supplemental unemployment benefits for the laid-off workers will also end.
CSC has been operating under Chapter 11 bankruptcy protection and owes the lenders more than $109 million. Fewer than 100 employees are still at work at the steel bar mill, and steel processing ended last week.
Here was argument: The company had argued it was obligated under its collective bargaining agreement with the United Steelworkers of America to continue funding benefits as long as it had employees working inside the plant. Lenders have given CSC an April 13 deadline to complete the mothballing process and close the mill.
The lenders, led by First Union National Bank, balked at its $170,000 weekly insurance payments to Blue Cross/Blue Shield, saying it was unreasonable to continue funding benefits when the plant is idle.
They said their total cost, with supplemental unemployment and workers' compensation benefits, topped $250,000 a week.
While the judge agreed that CSC is obligated to pay for its employee benefits, he said those payments are subject to the availability of funds "and the debtors have no funds with which to make those payments if the lenders do not consent."
Judge Bodoh noted in his ruling that CSC has liens on most of its assets and agreed in January that it would have "absolutely no right" to use its cash collateral, the proceeds from recent product sales, without permission of the lenders.
Profit vs. value: CSC argued that the company has earned profits of about $10 million through the sale of its stockpiled inventory since the bankruptcy filing, funds which could be used to fund the benefits.
Judge Bodoh said, however, that those funds have been turned over to the lenders to reduce the company's debt and cannot be retrieved.
"Reluctantly, the court must overrule the motion of the debtor for emergency use of cash collateral," the judge said.
He noted that court documents set CSC's net value at less than $60 million, about $50 million less than it owes the lenders, so it has nothing to offer in exchange for further spending of its cash collateral.
Salaried CSC workers who have been furloughed are not affected by the ruling because they lost their health benefits immediately when they were laid off.
Union leaders have said that hourly workers do not qualify for COBRA, a benefit provided under federal law which requires companies to make health benefits available to unemployed workers at their own expense. If the weekly insurance payment isn't made Monday, the policy will be terminated and CSC won't have a plan to offer.
John Kubilis, Local 2243 president, had said the union wanted the benefits to be extended until the April 13 deadline to give officials time to find an alternative coverage plan for the workers.