Nortel Cited for Pension Deficit

According to the Globe & Mail (citing a Moody Investors Service report), Nortel is among the to 10 companies that has an underfunded pension plans. Moody’s said Montreal-based Alcan has the largest pension deficit, $3.1-billion, of the companies it rates, while Nortel and BCE Inc. had deficits of $2.9-billion and $2.4-billion respectively. Tags: , ,

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One Response to “Nortel Cited for Pension Deficit”

  1. Observer Says:

    Nortel holds the largest pension deficit in Canada if we consider what Alcan’s position:

    http://www.theglobeandmail.com/servlet/story/LAC.20061116.RALCAN16/TPStory/?query=alcan

    “Alcan counters pension shortfall status

    Reuters News Agency

    VANCOUVER — Alcan Inc. hit back yesterday at a report naming it as the company in Canada with the biggest pension shortfall, and said the analysis did not take into account that it was not required to set aside retirement monies at its European operations.

    In a report released Tuesday ratings agency Moody’s Investors Services said Alcan’s pension plan was underfunded to the tune of $3.1-billion at the end of 2005, putting it at the top of a list of Canadian companies that had Nortel Networks at No. 2 and Bombardier Inc. at No. 3.

    Rhodri Harries, vice-president and treasurer of Alcan, said about $1-billion (U.S.) of the $3.1-billion (Canadian) figure related to Alcan’s businesses in Europe, where pension plans were generally run on a “pay as you go” basis and “unfunded by design.”

    “There is no regulatory requirement to fund them and no tax benefits,” Mr. Harries told Reuters.

    He said the remaining sum of around $1.7-billion (U.S.) did need to be funded, but the size of the liability was not surprising given that Alcan is one of Canada’s biggest companies and hence would have a very large pension plan.

    “We are in a very good position to service those liabilities through the combination of the assets that we have put aside, through the strength of our business and through the strength of our balance sheet,” Mr. Harries said.

    Moody’s said that an underfunded pension plan would not generally cause a change in a company’s credit rating on its own, but it could “contribute materially” to the overall rating assessment.

    It said telecom equipment giant Nortel Networks Corp.s’ pension plan was underfunded to the tune of $2.9-billion (Canadian) at the end of 2005 and Bombardier Inc’s was underfunded by $2.6-billion.”

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