Exemption From the Bond/Escrow Requirement Relating to the Sale of Assets by an Employer That Contributes to a Multiemployer Plan; St. Louis Cardinals, L.P.

PENSION BENEFIT GUARANTY CORPORATION

Exemption From the Bond/Escrow Requirement Relating to the Sale

of Assets by an Employer That Contributes to a Multiemployer Plan; St.

Louis Cardinals, L.P.

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Notice of exemption.

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SUMMARY: The Pension Benefit Guaranty Corporation has granted a request

from the St. Louis Cardinals, L.P. for an exemption from the bond/

escrow requirement of section 4204(a)(1)(B) of the Employee Retirement

Income Security Act of 1974, as amended, with respect to the Major

League Baseball Players Benefit Plan. A notice of the request for

exemption from the requirement was published on July 24, 1996 (61 FR

38480). The effect of this notice is to advise the public of the

decision on the exemption request.

ADDRESSES: The non-confidential portions of the request for an

exemption and the PBGC response to the request are available for public

inspection at the PBGC Communications and Public Affairs Department,

Suite 240, 1200 K Street, NW., Washington, DC 20005-4026, between the

hours of 9:00 a.m. and 4:00 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Ralph L. Landy, Office of the General

Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,

Washington, DC 20005-4026; telephone 202-326-4127 (202-326-4179 for TTY

and TDD). These are not toll-free numbers.

SUPPLEMENTARY INFORMATION:

Background

Section 4204 of the Employee Retirement Income Security Act of

1974, as amended by the Multiemployer Pension Plan Amendments Act of

1980 (``ERISA'' or ``the Act''), provides that a bona fide arm's-length

sale of assets of a contributing employer to an unrelated party will

not be considered a withdrawal if three conditions are met.

[[Page 53464]]

These conditions, enumerated in section 4204(a)(1)(A)-(C), are that--

(A) The purchaser has an obligation to contribute to the plan with

respect to the operations for substantially the same number of

contribution base units for which the seller was obligated to

contribute;

(B) The purchaser obtains a bond or places an amount in escrow, for

a period of five plan years after the sale, in an amount equal to the

greater of the seller's average required annual contribution to the

plan for the three plan years preceding the year in which the sale

occurred or the seller's required annual contribution for the plan year

preceding the year in which the sale occurred (the amount of the bond

or escrow is doubled if the plan is in reorganization in the year in

which the sale occurred); and

(C) The contract of sale provides that if the purchaser withdraws

from the plan within the first five plan years beginning after the sale

and fails to pay any of its liability to the plan, the seller shall be

secondarily liable for the liability it (the seller) would have had but

for section 4204.

The bond or escrow described above would be paid to the plan if the

purchaser withdraws from the plan or fails to make any required

contributions to the plan within the first five plan years beginning

after the sale.

Additionally, section 4204(b)(1) provides that if a sale of assets

is covered by section 4204, the purchaser assumes by operation of law

the contribution record of the seller for the plan year in which the

sale occurred and the preceding four plan years.

Section 4204(c) of ERISA authorizes the Pension Benefit Guaranty

Corporation (``PBGC'') to grant individual or class variances or

exemptions from the purchaser's bond/escrow requirement of section

4204(a)(1)(B) when warranted. The legislative history of section 4204

indicates a Congressional intent that the sales rules be administered

in a manner that assures protection of the plan with the least

practicable intrusion into normal business transactions. Senate

Committee on Labor and Human Resources, 96th Cong., 2nd Sess., S. 1076,

The Multiemployer Pension Plan Amendments Act of 1980: Summary and

Analysis of Considerations 16 (Comm. Print, April 1980); 128 Cong. Rec.

S10117 (July 29, 1980). The granting of an exemption or variance from

the bond/escrow requirement does not constitute a finding by the PBGC

that a particular transaction satisfies the other requirements of

section 4204(a)(1).

Under the PBGC's regulation on variances for sales of assets (29

CFR Part 4204, available at 61 FR 34002, 34084 (July 1, 1996)), a

request for a variance or waiver of the bond/escrow requirement under

any of the tests established in the regulation (sections 4204.12-

4204.13) is to be made to the plan in question. The PBGC will consider

waiver requests only when the request is not based on satisfaction of

one of the three regulatory tests or when the parties assert that the

financial information necessary to show satisfaction of one of the

regulatory tests is privileged or confidential financial information

within the meaning of 5 U.S.C. 552(b)(4) (the Freedom of Information

Act).

Under section 4204.22 of the regulation, the PBGC shall approve a

request for a variance or exemption if it determines that approval of

the request is warranted, in that it--

(1) Would more effectively or equitably carry out the purposes of

Title IV of the Act; and

(2) Would not significantly increase the risk of financial loss to

the plan.

Section 4204(c) of ERISA and section 4204.22(b) of the regulation

require the PBGC to publish a notice of the pendency of a request for a

variance or exemption in the Federal Register, and to provide

interested parties with an opportunity to comment on the proposed

variance or exemption. The PBGC received no comments on the request for

exemption.

The Decision

On July 24, 1996 (61 FR 38480), the PBGC published a notice of the

pendency of a request by the St. Louis Cardinals, L.P. (the ``Buyer'')

for an exemption from the bond/escrow requirement of section

4204(a)(1)(B) with respect to its purchase of the St. Louis Cardinals

Baseball Team from the St. Louis Baseball Club, Inc. (the ``Seller'').

According to the request, the Major League Baseball Players Benefit

Plan (the ``Plan'') was established and is maintained pursuant to a

collective bargaining agreement between the professional major league

baseball teams (the ``Clubs'') and the Major League Baseball Players

Association (the ``Players Association'').

According to the Buyer's representations, the Seller was obligated

to contribute to the Plan for certain employees of the sold operations.

Effective March 21, 1996, the Buyer and Seller entered into an

agreement under which the Buyer agreed to purchase substantially all of

the assets and assume substantially all of the liabilities of the

Seller relating to the business of employing employees under the Plan.

The Buyer agreed to contribute to the Plan for substantially the same

number of contribution base units as the Seller. The Seller agreed to

be secondarily liable for any withdrawal liability it would have had

with respect to the sold operations (if not for section 4204) should

the Buyer withdraw from the Plan within the five plan years following

the sale and fail to pay its withdrawal liability. The amount of the

bond/escrow required under section 4204(a)(1)(B) of ERISA is

approximately $873,000. The estimated amount of the unfunded vested

benefits allocable to the Seller with respect to the operations subject

to the sale is $7,340,095. The transaction had to be approved by Major

League Baseball, which required that the debt-equity ratio of the Buyer

be no more than 60 percent. The Buyer's financial statements showed

that its net tangible assets exceed the unfunded vested benefits

allocable to the Seller with respect to the purchased operations. The

Buyer requested confidential treatment of its financial statements on

the ground that they are confidential within the meaning of 5 U.S.C.

552.

Based on the facts of this case and the representations and

statements made in connection with the request for an exemption, the

PBGC has determined that an exemption from the bond/escrow requirement

is warranted, in that it would more effectively carry out the purposes

of title IV of ERISA and would not significantly increase the risk of

financial loss to the Plan. Moreover, the PBGC has determined that the

Buyer satisfies the net tangible assets test contained in section

4204.13(a)(2) of the regulation, and would be entitled to a variance of

the bond/escrow requirement from the Plan under section 4204.11 of the

regulation.

Therefore, the PBGC hereby grants the request for an exemption for

the bond/escrow requirement. The granting of an exemption or variance

from the bond/escrow requirement of section 4204(a)(1)(B) does not

constitute a finding by the PBGC that the transaction satisfies the

other requirements of section 4204(a)(1). The determination of whether

the transaction satisfies such other requirements is a determination to

be made by the Plan sponsor.

Issued at Washington, DC, on this 7th day of October, 1996.

Martin Slate,

Executive Director.

[FR Doc. 96-26181 Filed 10-10-96; 8:45 am]

BILLING CODE 7708-01-P