January 17, 2013

AT&T got whacked for pension charges:

AT&T Inc. (T), the largest U.S. phone company, recording a $10 billion fourth-quarter charge for its pension plan and said smartphone subsidies put pressure on profit in the period.

The company lowered its expected long-term rate of return for the pension to 7.75 percent, citing “continued uncertainty” for the stock market and the U.S. economy, according to a filing today.

According to the 2011 Annual Report:

Our return on assets assumption was 8.25% for the year ended December 31, 2011. In 2011, we experienced actual returns on investments lower than expected; however, in 2012 we will maintain 8.25% for our expected return on assets, based on long-term expectations of future market performance and the asset mix of the plans’ investments.

Consider the plans’ asset mix, I’d say 7.75% is wildly optimistic:

  Pension Assets Postretirement (VEBA) Assets
  Target 2011 2010 Target 2011 2010
Equity securities:
Domestic 25% – 35% 24% 29% 34% – 44% 39% 42%
International 10% – 20% 15 15 26% – 36% 31 34
Fixed income securities 30% – 40% 34 34 16% – 26% 21 14
Real assets 6% – 16% 11 9 0% – 6% 1 1
Private equity 4% – 14% 13 12 0% – 10% 5 4
Other 0% – 5% 3 1 0% – 8% 3 5
Total 100%   100%  

However, they can proudly declare that they’re not as bad as Illinois:

Three brawling Illinois Democrats are presiding over a fiscal muck that has made the state the new archetype of dysfunction as longtime champion California last week projected its first surplus in a decade.

Years of indecision, gridlock and mismanagement have produced a $97 billion pension-funding deficit and more than $9 billion in unpaid bills, saddling Illinois with the nation’s lowest rating from Moody’s Investors Service. As a result, taxpayers are paying more to borrow, and the state’s ability to provide essential services is withering as annual retirement obligations devour more money.

It was another mixed day for the Canadian preferred share market, with PerpetualPremiums dropping 3bp, FixedResets up 7bp and DeemedRetractibles gaining 6bp. Volatility was low. Volume continued to be heavy.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.1322 % 2,502.0
FixedFloater 4.38 % 3.70 % 29,237 18.00 1 -0.6419 % 3,709.8
Floater 2.78 % 3.00 % 60,970 19.73 4 -0.1322 % 2,701.5
OpRet 4.63 % 0.73 % 53,298 0.37 4 0.0096 % 2,593.0
SplitShare 4.58 % 4.50 % 44,705 4.32 2 0.1196 % 2,908.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0096 % 2,371.1
Perpetual-Premium 5.25 % -0.54 % 76,006 0.12 30 -0.0303 % 2,345.7
Perpetual-Discount 4.85 % 4.87 % 135,982 15.70 4 -0.1015 % 2,646.3
FixedReset 4.91 % 2.83 % 222,340 3.64 78 0.0738 % 2,480.5
Deemed-Retractible 4.87 % 1.61 % 117,943 0.34 45 0.0568 % 2,428.5
Performance Highlights
Issue Index Change Notes
HSB.PR.D Deemed-Retractible 1.10 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-02-16
Maturity Price : 25.50
Evaluated at bid price : 25.85
Bid-YTW : -8.74 %
GWO.PR.N FixedReset 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.68
Bid-YTW : 3.80 %
Volume Highlights
Issue Index Shares
Traded
Notes
NA.PR.Q FixedReset 295,576 Added to TXPR and TXPL.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-11-15
Maturity Price : 25.00
Evaluated at bid price : 26.36
Bid-YTW : 2.54 %
ENB.PR.T FixedReset 235,283 Added to TXPR.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 3.78 %
GWO.PR.N FixedReset 141,890 RBC crossed two blocks of 65,000 each, both at 23.60.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.68
Bid-YTW : 3.80 %
BAM.PR.Z FixedReset 108,812 Desjardins crossed 11,800 at 26.45. RBC crossed blocks of 44,700 and 44,600, both at 26.47.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.46
Bid-YTW : 3.57 %
RY.PR.X FixedReset 70,216 Scotia crossed blocks of 26,800 and 40,000, both at 26.89.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.95
Bid-YTW : 1.90 %
MFC.PR.J FixedReset 56,866 Added to TXPR and TXPL.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 3.44 %
There were 57 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.G FixedFloater Quote: 21.67 – 22.31
Spot Rate : 0.6400
Average : 0.4932

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2043-01-17
Maturity Price : 22.31
Evaluated at bid price : 21.67
Bid-YTW : 3.70 %

PWF.PR.L Perpetual-Premium Quote: 25.51 – 26.10
Spot Rate : 0.5900
Average : 0.4497

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.51
Bid-YTW : 4.37 %

VNR.PR.A FixedReset Quote: 26.10 – 26.40
Spot Rate : 0.3000
Average : 0.2269

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-15
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 3.37 %

FTS.PR.E OpRet Quote: 26.70 – 26.95
Spot Rate : 0.2500
Average : 0.1792

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.70
Bid-YTW : -3.42 %

ELF.PR.F Perpetual-Premium Quote: 25.37 – 25.60
Spot Rate : 0.2300
Average : 0.1689

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-02-16
Maturity Price : 25.25
Evaluated at bid price : 25.37
Bid-YTW : -0.54 %

IGM.PR.B Perpetual-Premium Quote: 26.75 – 26.96
Spot Rate : 0.2100
Average : 0.1607

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 26.00
Evaluated at bid price : 26.75
Bid-YTW : 4.04 %

One Response to “January 17, 2013”

  1. […] mentioned Illinois’ pension woes on January 17. They’re getting worse: Illinois had its debt rating cut one level to A- by Standard & […]

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