The 9 Firms Most Exposed to Risky Multiemployer Pensions

(August 13, 2012) – Rating agency Fitch is concerned about the risks of multiemployer pension plans (MEPP) to participating companies’ solvency, and has calculated the nine firms most exposed to these typically “significantly underfunded” plans.  

And they sent aiCIO the list. 

1. Safeway Inc. 

2. Supervalu Inc. 

3. Kroger Co. 

4. Harsco Corporation 

5. Dean Foods Company 

6. Rite Aid Corporation 

7. News Corporation 

8. US Airways Group Inc. 

9. Del Monte Group 

With multiemployer pension plans, participating companies and their employees bear the risk of investment losses despite having limited control over plan administration and investment decisions. Fitch’s report further noted that “when a participating employer files for Chapter 11 or liquidates, that employer’s share of the funding shortfall would land on the remaining employers in the plan to the extent it is not recovered in the courts.” 

Fitch’s issuer default ratings for these companies range from decent to marginal, with Dean Foods and Del Monte pulling passable Bs, and Supervalue bringing up the rear with a CCC. 

The ratings agency is watching MEPP exposure closely as they periodically adjust their ratings. “Fitch does not expect any near-term rating actions resulting from MEPP liabilities,” the report said. “However, growth in MEPP contributions due to funding shortfalls, which can be exacerbated by employer insolvencies, could result in further downward pressure on supermarket EBIT margins, which have already narrowed significantly in recent years, and, over time, lead to rating downgrades.”