Fitch: Pension Contributions Remain a Credit Concern for U.S. Corporate Issuers in 2009/10

NEW YORK--(BUSINESS WIRE)--According to a new report issued by Fitch Ratings, increased pension contributions for 2009 and 2010 remain a significant credit concern for U.S. non-financial corporate issuers. Fitch says required pension funding levels will negatively affect corporate liquidity with claims expected to increase sharply in 2010. Fitch doesn't expect to take rating actions based solely on increased contributions; however for those on the edge of a rating category, the need to make ongoing payments could be one of the factors leading to Negative Rating Outlooks or rating changes.

'Our analysis shows that at the end of 2008, the weakest four industries from a pension funding perspective are autos, energy, transportation and retail,' said John Culver, Senior Director at Fitch and lead author of the report. 'In particular, autos and transportation have been facing long-term secular issues that have affected their ability to fund their pension plans.'

According to the report, at the end of 2007, the plans of the 214 non-financial U.S. companies with pensions rated by Fitch were approximately 103% funded, but following the dismal performance of the equity markets in 2008 in the aggregate plans were underfunded at approximately 76% on a generally accepted accounting principles (GAAP) basis, and the median company was 71% funded. For many of these issuers, increases in contributions in 2009 and 2010 appear to be manageable relative to expected cash flows.

The report screens U.S. non-financial corporate issuers rated by Fitch, by providing a high level view of their funded level at the end of 2008, and estimates their ability to fund potential contributions in 2009 and beyond. The screens serve to identify companies that may need further investigation regarding their pension plan funding status and ability to fund potential contributions.

The special report, 'U.S. Corporate Pensions - Annual Overview - 2009', is available at 'www.fitchings.com'.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings
John Culver, CFA, +1-312-368-3216, Chicago
Jamie Rizzo, CFA, +1-212-908-0548, New York
Media Relations:
Cindy Stoller, +1-212-908-0526, New York
cindy.stoller@fitchratings.com