When Daniel Levesque retired in 2010 after a three-decade career as an engineer at Nordion, the last thing he ever thought he’d need to worry about was his pension.
But the Ottawa firm’s sale to U.S.-based Sterigenics does worry pensioners like Mr. Levesque, who know all too well that seemingly comfortable retirement nest eggs can disappear in the blink of an eye.
He points to Nortel, whose former employees have seen their pension benefits slashed by 30 to 40 per cent since the onetime tech behemoth filed for bankruptcy protection in 2009. Lawyers for the plan are still fighting for a chunk of Nortel’s asset sales to cover a $3-billion shortfall.
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Mr. Levesque is one of about 100 former Nordion employees who have written to federal Industry Minister James Moore urging the government to give the takeover close scrutiny before approving it.
“With the fiasco that happened with Nortel, one would think that this should deserve some attention,” says Eric Smith, who worked in Nordion’s finance department for more than three decades.
Mr. Smith wants the federal government to approve the takeover only on the condition that Nordion either wipes out its pension fund’s deficit before the deal is complete or that Sterigenics provides financial security equivalent to the shortfall, which currently stands in the tens of millions of dollars.
“Legally, they’re obligated to have to continue to top up the pension plan,” he says. “The concern is, if they were ever to become insolvent, what good is that? You can’t put odds on this. Even if it’s one per cent, shame on us if we didn’t attempt to try to get our government to try to support us on this before the actual trigger of the sale goes through.”
Nordion operates a defined benefit pension plan under which retirees are paid a set monthly amount based on a specific formula, with the company responsible for covering any shortfalls in the plan. Mr. Smith says Nordion’s plan had a solvency deficit of $78 million in January 2013, requiring the company to pay $16 million to meet its funding obligations in the last fiscal year.
For its part, Nordion says the $811-million deal, which shareholders approved earlier this month, includes safeguards to protect pensioners.
“The Arrangement Agreement between Nordion and Sterigenics contains an employee covenant whereby the purchaser has to honour and perform all of Nordion’s obligations under employment and other agreements with current and former employees,” Nordion spokesperson Tamra Benjamin wrote in an e-mail to OBJ.
That’s of little comfort to Mr. Smith, who wrote to Mr. Moore in mid-April but says he has yet to hear from the minister’s office.
A local employment lawyer says such fears are easy to understand.
“Companies can always go insolvent,” says Steve Levitt, a partner at Nelligan O’Brien Payne LLP. “Typically, if they’re going insolvent, the pension plan isn’t fully funded.”
The government might demand a buyer live up to its pension obligations as a condition of sale, but “if a company goes bankrupt, it goes bankrupt. Pensioners are just an unsecured creditor like everybody else.”
