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.
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