EUROPE - Ratings agency Standard & Poor's has told some of Europe's leading companies to buck-up pension fund deficits or face being downgraded.
S&P’s analysis was based on estimates of the value of equity assets in each company's pension fund at the end of 2002, and on the extent of unfunded post-retirement obligations.
Emmanuel Dubois-Pelerin, an S&P credit analyst explained that a continuing rise in healthcare costs, ongoing deterioration in equity values, and a weakened global economic environment have increased the risk of shortfalls.
Standard & Poor's views unfunded post-retirement liabilities as debt-like in nature, given the future call on cash these liabilities necessarily represent, despite the difficulties of precisely valuing such liabilities and the various estimates involved, he said.
Of S&P’s review of 500 companies, those affected included Arcelor; Compagnie Générale Des Etablissements Michelin; Deutsche Post; GKN Holdings; Pilkington; Portugal Telecom; Rolls-Royce; ThyssenKrupp, TPG, J. Sainsbury and BAe Systems.
But S&P added that only J. Sainsbury, BAe Systems, Rolls-Royce and Thyssen-Krupp may be subject to a two-notch downgrade.
*Separately, chemicals group and former bellwether ICI, revealed a £688m gap in its pension fund.
The company saw shares fall 7% to close at a 10-year low of 190p, according to reports.
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.