Pension Deficit Is About To Bite Bond Investors
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The $500 billion deficit in the retirement plans of American companies is about to bite corporate bond investors.
Goodyear Tire & Rubber, Eastman Kodak, TRW Automotive Holdings, and hundreds more companies delinquent in contributing to pensions will have to disclose more information about retirement funds and healthcare costs in financial statements later this year, accounting rulemakers say.
Congress is debating a new law that would force them to start plugging the gaps in their pension plans.
The rules may require companies to use cash or borrow to meet obligations to millions of pensioners. Fixing the retirement funds could cause bond losses of $24 billion, based on how investors in high-yield, high-risk debt reacted the last time concerns about pensions flared. Investors holding the $5 trillion of bonds sold by companies in America aren’t prepared.
