Two recent developments suggest that the Pension Benefit Guaranty Corporation (PBGC) intends to become more active in leverage buyout (LBO) transactions involving underfunded pension plans:

• In April, the PBGC initiated proceedings to terminate a pension plan in connection with Compagnie de Saint-Gobain’s sale of its US metal and glass containers business to Ardagh Group, a move that is typically viewed as an attempt to scuttle a transaction.
• In a recent interview, the PBGC has announced that it intends to become more aggressive in future LBO transactions and to allocate more of its resources in this area.

Collectively, these actions and statements amount to a significant increase in PBGC-related risk in these transactions, and one which buyers and sellers should not discount or ignore.