Wabush Mines – December 17, 2015
December 17, 2015
On December 17, 2015, we were informed that the Newfoundland Superintendent of Pensions (the “Newfoundland Regulator”) and the federal Superintendent of Financial Institution (“OSFI”) made a joint decision to order the wind up of the Wabush Salaried Pension Plan and the Wabush Union Pension Plan. A copy of the letter sent by the Newfoundland Regulator to the company dated December 16, 2015 can be viewed here.
We spoke with the Newfoundland Regulator on December 17, 2015 and they advised that they reached their decision to wind up the plan at this time for a number of reasons, including the following:
- Wabush has been an inactive company for an extended period of time even before entering into CCAA protection in May, 2015. The Newfoundland Regulator believes that it is unlikely Wabush will restructure and emerge from CCAA as a functioning company and as such, it will not be able to continue administering the pension plans;
- The Newfoundland Regulator wishes to make the record clear that the pension plans are wound up prior to that CCAA Claims Bar Date of December 18, 2015, which is the date for the filing of creditor claims against the company; and
- In May, 2015, the CCAA Judge of the Québec Superior Court of Justice had previously approved the suspension of special payments by the company to the pension plans and the non-payment of these amounts is contributing to the underfunding in the pension plan assets.
The Newfoundland Regulator advised that due to the underfunding in the pension plans it is expected there will be a reduction to the amount of monthly pension benefits being paid to retirees commencing in February or March, 2016. Currently, the pension plans are approximately 75% to 80% funded, which would result in a monthly pension benefit reduction in the range to 20% to 25%.
Please note that the pension benefit reduction mentioned above does not take into account any amounts that can be recovered for the pension plans from the cash in the estate of the company in the CCAA proceedings in the future. As we previously indicated, we have asserted a first priority claim (payable after the CCAA-ordered priorities) against the assets of Wabush Mines on behalf of the Salaried Pension Plan members based on the statutory deemed trust priority provisions in the Newfoundland Pension Benefits Act. This priority claim has not yet been settled and is expected to be addressed further in the ensuing months.
The Newfoundland Regulator has published an advisory dated December 17, 2015 relating to the declaration of the wind up of the Wabush Mines pension plans, which can be found in the link below: