Bethlehem Steel Proposes to Terminate
Retiree Health, Insurance Plans
Bethlehem, PA - Through Section 1114 of the Bankruptcy
Code, Bethlehem Steel Corporation is seeking to eliminate health and life
insurance benefits for substantially all of its retired workforce and
their eligible dependents.
By letter, dated February 6, 2003, Bethlehem made a proposal to the Section
1114 Committees to terminate such benefits on March 31, 2003.
Bethlehem is seeking the termination of such benefits for about 95,000
persons "because we cannot pay the obligations for retiree health
and life insurance now or in the future. Due to our financial situation
and our impending sale of substantially all of our assets to International
Steel Group (ISG), we must seek the court's approval to terminate these
benefits. We find this decision extremely difficult, but unavoidable,
and sincerely regret that circumstances have led us to this decision,"
said Robert S. Miller, chairman and chief executive officer.
While Bethlehem Steel is seeking to eliminate retiree welfare benefits
through the bankruptcy process, it is also working with the Section 1114
Committee to arrange for access to affordable health and life insurance
coverage for its retirees. If such coverage can be arranged, it will be
available to current and future retirees who have eligibility for coverage
based on their company service.
Currently, Bethlehem Steel is speaking with several health care vendors
to solicit proposals for voluntary, 100-percent contributory insurance
programs for our eligible retired populations. After the current coverages
are terminated, Bethlehem "hopes to provide access to affordable
medical and life insurance to eligible persons. Although Bethlehem will
not be contributing any monies to such new coverages, we believe the size
of our retiree population will help us find affordable rates for those
persons interested in purchasing those plans," Mr. Miller said.
Bethlehem Steel's executive management and financial advisers agreed on
February 4 to recommend the sale of substantially all of Bethlehem's assets,
both ongoing and surplus, to International Steel Group, Cleveland, Ohio.
Bethlehem's board will consider that sale in a vote on February 8. If
approved, Bethlehem and ISG will then complete an asset purchase agreement,
which is expected to be submitted to Bethlehem's bankruptcy judge in about
one to two weeks.
As part of the agreement to sell Bethlehem's assets to ISG, neither party
will assume retiree health or life insurance obligations, which averaged
more than $19 million each month in 2002. Although most Bethlehem retirees
pay a portion of the cost of their post-retirement health care benefits,
the vast majority of the costs associated with the benefits are borne
by Bethlehem. The corporation's aggregate actuarial obligations for all
future retiree welfare benefits for its current retirees and eligible
dependents is about $3 billion.