To his critics, he represents everything that’s wrong with this setup. In recent years, a large number of the companies that Sun Capital has acquired have run into serious trouble, eliminated jobs or both. Since 2008, some 25 of its companies — roughly one of every five it owns — have filed for bankruptcy.
Among the losers was Friendly’s, the restaurant chain known for its Jim Dandy sundaes and Fribble shakes. (Sun Capital was accused by a federal agency of pushing Friendly’s into bankruptcy last year to avoid paying pensions to the chain’s employees; Sun disputes that contention.)
Here’s one of the 47% that Mitt Romney demeans and insults when begging for money:
FOR more than 28 years, Helen Smolak worked at the Friendly’s in Denham, Mass. Day in and day out, she served Big Beef Burgers and Fribbles, collected tips and made a decent living.
All that changed one evening last October. That was when Ms. Smolak’s supervisor called to tell her the restaurant was shutting down — immediately.
“It was my family. That was my home,” said Ms. Smolak, 56. “Friendly’s always came first. I was supposed to retire with these people and with this company.”
The Pension Benefit Guaranty Corporation, the federal agency that helps safeguard corporate pensions, wasn’t so sure. It accused Sun Capital in bankruptcy court filings of using the bankruptcy to shift Friendly’s pension burden onto the agency.
And here’s how Romney’s host can afford those big donations:
In September and October of 2011, several restaurant chains owned by private equity firm Sun Capital – Friendly’s, the iconic ice cream parlor and family restaurant, SSI Group, which operates Grandy’s and Souper Salad restaurants, and Real Mex, which operates El Torito Restaurant and Chevys Fresh Mex – all entered bankruptcy.
In the case of Friendly’s, Sun Capital sought to use the bankruptcy proceedings to write off debt and to rid itself of the company’s pension obligations to its nearly 6,000 employees and retirees while continuing to own the restaurant chain. Immediately after Friendly’s entered bankruptcy another Sun Capital affiliate announced its intention to acquire Friendly’s. With less than two months between the bankruptcy announcement and the date set for the auction of Friendly’s, no other bidders came forward. On December 29 Judge Kevin Gross approved the sale and Sun Capital closed out 2011 allowed to “buy” Friendly’s in a “credit-bid” sale – that is, Sun Capital got to hold onto ownership of Friendly’s just by wiping out a $75 million loan it had made to Friendly’s and assuming Friendly’s liabilities.
A key part of Sun Capital’s restructuring plan is to shift liability for Friendly’s pension plan to the federal government’s Pension Benefit Guaranty Corporation (PBGC). Generally, PBGC does not require companies to make good on pension plans they can no longer afford. But in an unusual move, PBGC accused Sun Capital of fraud and announced that it will fight Sun Capital’s attempt to stick US taxpayers with the bill. PBGC objects to what appears to be a transparent effort by Sun Capital to take advantage of the bankruptcy process to abandon pension obligations while continuing to keep its ownership of Friendly’s.