NEW YORK - Financier Carl Icahn and creditor groups of bankrupt car parts company Federal-Mogul Corp. on Wednesday said they made a "fair offer" to keep a U.K. pension plan funded, but the fund administrator is threatening to shut the fund down.
The issue, which has generated considerable controversy in Britain, revolves around the pension fund covering some 40,000 current and former workers at Federal-Mogul's U.K. subsidiary Turner & Newall.
Southfield, Mich.-based Federal-Mogul, which makes Champion spark plugs and other car parts, is operating under Chapter 11 bankruptcy protection, throwing future funding for the U.K. pension fund in doubt.
The plan's administrator says the fund would face a $1.5 billion deficit if it were to be shut down, a move that would leave many T&N workers with a fraction of what they are owed. The plan administrators say without more capital, they may be forced to close it.
Icahn, a prominent U.S. multi-billionaire who is by far the largest holder of Federal-Mogul bonds, said he has offered to buy the U.K. T&N assets for $700 million, of which $130 million would go toward funding the pension scheme.
Officials from Federal-Mogul, its creditors, Icahn and various others met this week in New York to negotiate a settlement for the pension scheme, but so far no resolution has been achieved.
Icahn's bonds are expected to be converted into equity under a plan of reorganization that Federal-Mogul is working to devise.
In an interview, Icahn said he is facing resistance from "certain people with certain agendas who would like to see it go into liquidation." He did not disclose who those people are.
"There would be no necessity to terminate the pension plan under our offer, which in my opinion is more than anyone else would pay for the assets," Icahn said. "We made an offer that is better than anyone else for the assets."
A representative of the pension plan did not return phone calls.
The prospect of Icahn owning T&N has raised fears in the U.K. that the often-described "corporate raider" would engage in a program of "asset stripping" that would throw hundreds of workers out of their jobs, according to union officials.
But Icahn said his intention is to build both Federal-Mogul and T&N and make them into successful companies. Icahn said he owns more than 20 companies and has "put a lot of capital into them."
"We have sold very few companies," said Icahn, whose holdings include real estate, casinos, telecommunication companies and others. "I believe Federal-Mogul will not only survive but prosper greatly."
Peter Wolfson, a lawyer who represents the Federal-Mogul creditors committee, said the offer by Icahn and creditors would allow the fund to continue to operate and grow its assets over the years.
"It would be the dumbest thing I ever heard of to shut it down," said Wolfson, who was involved in the talks. "We think shutting it down would be totally irresponsible."
Wolfson, a lawyer for Sonnenschein Nath & Rosenthal, said Federal-Mogul is under no obligation to continue to fund the pension scheme.
"If we are not able to reach a consensual plan with the pension trustee or the pension administrator, and they decide to liquidate it, we have no objection to that," said Wolfson. "We are going to give them some money that in our judgment is more than they would get in a liquidation."