Sun Capital PE Funds Could Face Pension Liability—Reports

Deborah L. Cohen | April 1st, 2016 | MMG

Two private equity funds affiliated with Sun Capital are liable for the underfunded pension of a bankrupt portfolio company, Bloomberg News reported.

The Sun Capital funds are jointly liable for $4.5 million in pension fund debt, according to the Bloomberg report earlier this week.

The case, which was brought by the New England Teamsters and Trucking Industry Pension Fund, could have broad-ranging implications for the private equity industry, Bloomberg said.

Building off a ruling by the U.S. Court of Appeals for the First Circuit three years ago, a Massachusetts federal judge “concluded that both of the Sun Capital funds involved in the dispute qualified as trades or businesses under common control with bankrupt brass company Scott Brass Inc…,” the wire service said.

Jeffrey B. Cohen, a partner with Bailey & Ehrenberg PLLC who litigates disputes under the Employee Retirement Income Security Act, told Bloomberg the case “one of the most important ERISA cases of this decade.”

“If the reasoning adopted by the courts in the Sun Capital cases is broadly applied in other circuits, private equity funds could become directly liable for the pension liabilities of certain of their portfolio companies,” reported the law firm Sullivan & Cromwell LLP, in a report issued following the most recent court decision.

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