CF&I Steel Corp. of Pueblo, Colo., which has a Salt Lake subsidiary, CF&I Fabricators, has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in U.S. District Court for Utah.
According to a published announcement, company officials said the action was necessary because of the costs of the underfunded pension plan and continued weak market for the firm's major product lines. Chapter 11 permits a company to remain in business while it reorganizes its financial affairs under court protection.Frank Yaklich, company president and chief executive officer, said, "During this process, CF&I will continue to operate, provide jobs for our employees and meet the needs of our loyal customers with quality products."
"We filed Chapter 11 to resolve some financial problems. I want our employees, customers, shareholders and suppliers all to know that CF&I is a survivor and that we are confident CF&I will emerge from this new challenge a stronger and better company," Yaklich said.
The total underfunded liability of the pension plan is estimated at $140 million. CF&I made a $12.3 million payment to the pension plan in September but missed an October payment of $1.8 million. Filing of the court papers suspends all payments to the plan.
Yaklich said a series of outside economic factors occurred simultaneously, including the failing energy industry in 1982 and 1983 that led to a downsizing of the company. The downsizing dramatically increased the number of retirees, reducing the company's ability to fund the pension plan.
As part of its reorganization, CF&I will seek to terminate the pension plan in the near future. If the plan is terminated, obligations to current and future retirees will become the responsibility of the Pension Benefit Guaranty Corp., the government agency which insures private pension funds.