Firm Wants to Keep Defense and Aerospace Unit : LTV Corp. Unveils Plan to Emerge From Bankruptcy

DALLAS — LTV Corp., the nation’s No. 2 steelmaker, Wednesday unveiled a plan to emerge from bankruptcy, proposing partial payment to 32,000 creditors and keeping its defense and aerospace unit, which had been in doubt.

“Today’s action reflects our commitment to emerge from Chapter 11 as quickly as possible with a strong, reorganized company that will be competitive in each of the industries we serve,” Chairman Raymond Hay said in a statement.

Industry experts had speculated that LTV, which ran into trouble two years ago because of losses in its steel business, might be forced to sell off its aerospace and defense unit, which has been called its crown jewel.

The plan is just a proposal and details must be negotiated with the company’s creditors. Bargaining is not expected to be completed this year, forestalling Dallas-based LTV’s emergence from bankruptcy, which at the time of its filing in July, 1986, was the largest bankruptcy in the nation’s history.

Mum on Details

“It marks very, very significant progress,” said Chris Street, trader with Bateman Eichler, Hill Richards Inc. in Los Angeles. “Most analysts thought they could not put forward a plan before the end of the year.”

In an effort to solve one of the company’s thorniest problems, Hay said LTV offered to make a substantial payment to the Pension Benefit Guaranty Corp. to benefit retired employees. The government body, which oversees pension funds, wants the company to make up for a $2-billion shortfall in the pension plan. But while LTV said it would make a “substantial” contribution toward the pension claim, it would not reveal what it has proposed to pay.

“One of the major assumptions of the plan is that three LTV steel pension plans previously terminated by the Pension Benefit Guaranty Corp. will remain terminated, with a very substantial recovery to be distributed to the PBGC in settlement of its $2-billion claim,” Hay said.

The cost associated with the pension plan was one of the major factors that led the company to file for bankruptcy protection, the company said. LTV halted life and health insurance benefits for 78,500 retired employees immediately after it filed for bankruptcy.

LTV did not disclose details of its proposed payment to creditors other than to say they would be made in various combinations of cash, debt and equity.

‘Put Rumors to Rest’

“The exact amount of (creditor) recovery is determined by the type of claim, and whether it is secured by collateral,” the company said. However, the Dallas Times Herald reported that the company was proposing to pay its creditors between 15 and 30 cents on the dollar.

In Chapter 11, a company is granted court protection from its creditors but must come up with a reorganization plan to satisfy its debts. After the plan is approved by the bankruptcy court, the company can emerge from the proceedings.

When it filed for bankruptcy protection 22 months ago, LTV listed liabilities of $4.22 billion and assets of $6 billion. It had lost about $1.5 billion between 1982 and the middle of 1986. At the time, the company said low-priced steel imports were doing it considerable harm.

Under the reorganization, LTV said it will focus on flat-rolled products, two aerospace defense groups and a streamlined energy products company, which makes equipment for oil and gas drilling. There had been speculation that the company might sell the defense and aerospace unit, which designs missile and rocket systems.

“They’ve put to rest some rumors regarding the shape of the company,” said Carl Martin, analyst with Dean Whitter Reynolds Inc. in Dallas. “The company will be easier to operate because the employees won’t be so worried about their futures.”

LTV said the future of its AM General Military Vehicle division, which faces high costs, and the fate of its Warren, Ohio, steel plant, which the company is trying to sell, are uncertain. Discussions with prospective buyers for the steel plant are currently under way.

The company also said it was unsure of the future for the bar segment of its steel business, which has been losing money. “We are convinced that we can’t come out of Chapter 11 with any unprofitable operations, but neither do we want to just abandon the bar business and shut it down,” Hay said.

Bar steel is used in construction, but that business has been stolen from the big integrated steel companies by so-called mini-mills, steel companies that operate on a much smaller scale.

Six months after LTV filed for bankruptcy, it handed over to the PBGC responsibility for its pension fund. The fund had $2 billion more in liabilities than it could cover.

But last September, PBGC returned responsibility for the pension fund to the company, saying LTV was financially strong enough to accept it.