Several days after a federal agency accused Sun Capital Partners, the owner of Friendly Ice Cream Corp., of fraud in the chain’s bankruptcy proceeding, the two parties have reached a settlement.
The Pension Benefit Guaranty Corp., which is responsible for protecting workers’ pension benefits, has alleged that Sun Capital illegally moved assets so that its affiliates could keep control of the Wilbraham chain and avoid paying retirement benefits to nearly 6,000 Friendly’s employees and retirees.
These assets are now being used by another Sun affiliate to bid on Friendly’s as it reorganizes in bankruptcy court, and that effort could artificially inflate the auction price and alienate other potential bidders, the federal agency claimed in a filing last week.
Todaya judge approved a settlement that would allow Sun Capital and its affiliate to use up to $50 million of those funds toward bidding on Friendly’s at an auction next week.
In court records, Sun Capital has stated that the the transfer involved debt, or a subordinated note, and not equity, as alleged by the pension agency.
Sun Capital’s stalking horse bid is currently valued at $75 million and all bids are due next week. An auction for Friendly’s assets is scheduled for next Thursday.
“We hope that the auction produces enough value so that a significant amount of money comes to PBGC to help pay for the benefits of Friendly’s retirees,’’ said Marc Hopkins, a spokesman for the Pension Benefit Guaranty Corp.
Sun Capital could not be reached for comment yesterday evening.