Standard & Poor's has issued a survey to 700 corporate pension plans asking how they invest their pension balances and to quantify their unfunded liabilities, according to BW sister publication Money Management Letter. The survey is part of a broader move by the ratings agency to factor in more heavily the unfunded liabilities of corporate pension plans when rating companies' debt, says Scott Sprinzen, managing director of corporate and government ratings.
"Pension liabilities have always been a factor when rating the debt of certain companies, but because of the way the stock market has gone, we feel we need an assessment of every company right now," Sprinzen says. Early indications show that pension plans of manufacturing companies have been hardest hit because the number of retirees receiving benefits often outnumber the amount of employees still working, he adds. One warning that a company is having trouble with its pension fund is when it uses the proceeds of a securities issue to help cover the unfunded portion of its pension plan, Sprinzen says.
S&P will start to use the results of the survey in its calculations within the next few weeks, and will release the results publicly soon after.