Tredegar Announces Initiation of Process for Pension Plan Termination and Settlement

Tredegar Corporation (NYSE:TG, also “Tredegar” or the “Company”) today announced that the Company’s Board of Directors has adopted a resolution to terminate its frozen defined benefit pension plan. The termination and settlement process, which preserves retirement benefits due to participants but changes the ultimate payor of such benefits, is expected to take up to 24 months to complete, subject to receipt of customary regulatory approvals. In connection therewith, on February 9, 2022, the Company borrowed funds under its revolving credit agreement to contribute $50 million to the pension plan (the “Special Contribution”) to reduce its underfunding and as part of a program within the pension plan to hedge or fix the expected future contributions that will be needed by the Company through the settlement process. The Company expects to realize income tax benefits on the Special Contribution of approximately $11 million. Administrative costs for the pension plan through the settlement process are estimated at $4 to $5 million.

As of December 31, 2021 (and before the Special Contribution), the estimated, unaudited pension plan underfunding under U.S. generally accepted accounting principles (“GAAP”) was $69 million, comprised of investments at fair value of $245 million and a projected benefit obligation (“PBO”) of $314 million. The ultimate settlement benefit obligation may differ from the PBO depending on market factors for buyers of pension obligations at time of settlement. Pension expense is projected to be approximately $14 million under GAAP in 2022 and zero for calculating earnings before interest, taxes, depreciation and amortization as defined in the Company’s revolving credit agreement (“Credit EBITDA”), which is used to compute certain borrowing ratios. The Company estimates that, with the Special Contribution, there will be no required minimum contributions to the pension plan until final settlement.

The Company reported total debt and cash and cash equivalents as of September 30, 2021, of $127 million and $30.3 million, respectively. On December 28, 2021, the Company announced that it had received $47.1 million from the sale of its ownership interest in kaleo, Inc. The Company’s revolving credit agreement allows borrowings of up to $375 million and matures in June 2024. The Company believes that its most restrictive covenant (computed quarterly) is the leverage ratio, which permits maximum borrowings of up to 4x Credit EBITDA, as defined under the revolving credit agreement for the trailing four quarters. The Company reported a leverage ratio of 1.32x as of September 30, 2021.