Bangkok--2 Jul--Standard & Poor's
Although global markets recovered in the latter half of 2009, pressure on U.S. corporate pension plans' funding levels recently has increased again, according to a report published yesterday by Standard & Poor's Ratings Services. This article, titled "Pension Deficits Pose Risks To Corporate Credit Quality, Despite Funding-Relief Measures," is part of a Standard & Poor's special report that looks at different aspects of the pension/retirement issue. Additional articles are listed at the end of this release.
Equity markets remained weak in the first half of 2010, while high-quality corporate bond yields, which companies use to discount postretirement plan obligations, are generally flat, the report says. These conditions, in our view, are likely to make it more difficult for many U.S. issuers to improve the large pension funding gaps they reported at the end of fiscal 2009. Despite the pension-funding relief recently signed into law, the economic recovery is susceptible to further downturns, and severe market volatility could continue to affect the value of many corporate issuers' pension plans and, therefore, affect credit quality.
While equity markets rebounded in 2009 from 2008 levels, U.S. corporate issuers faced a funding predicament. Standard & Poor's Ratings Services' recent review of rated issuers' corporate pension plans revealed that as pension asset levels surged last year, lower discount rates helped pension obligations grow nearly as much, which offset much of the expected improvement in funding levels. Because we treat post-retirement obligations, including pensions, as debt-like and adjust derived financial ratios accordingly, the adverse movement negatively affected many corporate credit metrics.
Other articles in the special report include:
Pensions: Can We Ever Retire?
Pension Funding And Policy Challenges Loom For U.S. States
Retirement: Live Longer, Work Longer, Get Less
Pensions And Retirement: The Opportunities And Risks For U.S. Insurers
The reports are available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase copies of these reports by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request copies of these reports by contacting the media representative provided.
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