For a handful of octogenarian Gottschalks retirees or their widows, the bankruptcy of the 105-year-old retail chain means more than the loss of the company at which they spent much of their working lives.
They’ve lost their pension, too.
Within days of the Fresno-based retailer filing its Chapter 11 petition with a bankruptcy court in Delaware, the remaining members of a small, select group of retirees received letters telling them their twice-monthly Gottschalks pension payments would stop.
Now they have to get in line with Gottschalks’ other creditors to see what’s going to be left after the company’s assets are liquidated and higher-priority bills paid.
“I don’t know what the preferences are, but I guess the suppliers get taken care of first,” said Guy Mathys, 83, who retired as Gottschalks’ merchandise manager for home furnishings after 26 years with the company. “I guess we’re at the end of the line.”
The benefit was created back in Gottschalks’ heyday, when the company had only one store — its longtime flagship in downtown Fresno — and only a few senior-level managers, said Joe Levy, Gottschalks’ chairman emeritus and former CEO.
“That goes way back, before we went public” in 1986, Levy said. “It was a program where you had to be in management and had to have 20 or 25 years with the company, and we only had about five people who qualified for it.”
The program was so obscure, in fact, that former Gottschalks Chief Financial Officer Daniel Warzenski — who lost his job this month when much of the company’s corporate staff was let go — said he wasn’t aware of its existence.
It’s common for companies to have different types of deferred compensation programs for managers and executives, said Jeff Pomerantz, a retail bankruptcy specialist with the Los Angeles law firm Pachulski Stang Ziehl & Jones.
But while many larger pension programs are protected by the federal Pension Benefit Guaranty Corp., which steps in to take over covered plans that are in distress, some are subject to termination when a company files for bankruptcy, Pomerantz said.
Other types of plans, including 401(k) programs, are separate from a company’s finances and protected from the bankruptcy estate, Pomerantz said. But Gottschalks’ limited retirement program was so small, Levy said, “that the accountants said it didn’t have to be funded” separately.
It’s been about three months since Mathys, who has Parkinson’s disease, last received an installment on his $26,000-a-year benefit.
About two days after the bankruptcy filing in January, “they sent a letter that our retirement was unsecured and was going to stop as of that date,” Mathys said. “They gave us some information about filing a claim with the bankruptcy court.”
“It’s definitely a hardship,” said Mathys, who has filed a claim with the U.S. Bankruptcy Court for more than $263,000. “It’s very disappointing, and I believe there’s only a small chance that I’ll get part of something” from the bankruptcy process.
The other three remaining retirement beneficiaries — listed among more than 500 pages of creditors in Gottschalks’ bankruptcy documents — are Jack Moody, 86, who spent 31 years with the company before retiring in 1989 as the vice president of marketing; and Lillian Holdsworth, 88, and Nancy Robertson, 66, widows of former Gottschalks managers Charles Holdsworth and F.G. “Scotty” Robertson. In bankruptcy documents, Gottschalks reports it has more than $54 million in unsecured debts that were accumulated prior to its Chapter 11 petition.
The inventory, equipment and fixtures from Gottschalks’ 58 stores around the western U.S. are now being sold in going-out-of-business sales. Most of the company’s leases and owned property will be auctioned in mid-May. Both sales will raise money to pay off Gottschalks’ estimated $211 million in liabilities.