The article includes Ken Hackel’s analysis that GM’s pension shortfall may reach $35 billion when calculated using lower asset returns and a reduced rate for valuing future payments.
CNBC’s Herb Greenberg discusses Ken’s recent article on pension closeouts.
December 8, 2010: CNBC Squawk Box – Bring Out Your Shorts in Winter
In the interview, Kenneth presents his analysis on Talbots (TLB) and Rite Aid (RAD).
The article discusses the implications of a significant increase in corporate pension plan contributions.
In the article, Kenneth Hackel, president of credittrends.com and CT Capital estimates that corporations will have to increase their pension plan contributions by 55% to a combined $190 billion this year. Furthermore, he believes that the 1,415 publicly traded companies reviewed by CT Capital will also have to contribute another $190 billion next year, amounting to a total of $380 billion for those two years.
November 8, 2010: Bloomberg – UPS Plans Debt Sale for Funding Pension Contributions
The article discusses UPS’s planed benchmark bond sale to pay for pension-fund contributions as companies face increasing retirement obligations in the future.
In the article, Kenneth Hackel, president of credittrends.com and CT Capital fully expects a continuation of stepped-up contributions throughout the balance of this year. Furthermore, Kenneth belives that the ramifications are much bigger than investors realize.
November 8, 2010: CNBC’s ‘Herb on the Street’ – Free Cash Flow More Hype Than Fact?
Companies have been talking up free cash flow this earnings season, but Ken Hackel provides multiple examples where there may be more hype than fact.
September 14, 2010: Bloomberg News – `Silent Heart Attack’ for Pensions Driven by Yields
In the article, Kenneth Hackel, president of credittrends.com and research and consulting firm CT Capital likens the shortfall to a ‘silent heart attack’. He believes “People aren’t recognizing the symptoms until the patient falls on the ground.”
The article quotes a recent Milliman report that contributions to the 100 biggest corporate pension plans increased to $54.5 billion in 2009 from $29.5 billion the previous year and compares with an average of $38.7 billion for the prior five years.
“It’s a major, major hit for companies to take,” said Hackel of Alpine, New Jersey-based CT Capital. “Sponsors are going to need to step up their contributions massively.”
August 29, 2010: CNNMoney.com – 3PAR bidding war: Are Dell and HP crazy?
In the article, Kenneth Hackel, president of credittrends.com and CT Capital estimates that 3PAR, “which has never turned an annual profit in its three years as a public company, would need to add over $40 million in free cash flow to make the deal profitable; and would that’s unlikely to happen for at least three years”. Ken likens the “bidding for 3PAR [is] reminiscent of two drunks at a horse auction, whereby the winner is the loser”. Furthermore, Ken believes “3PAR is a value-destroying acquisition because the expected cash return on HP or Dell’s invested capital would be below the cost of capital.” Ken also noted that both companies are actively buying back their own shares as well, leaving less for future acquisitions.
August 24, 2010: Barron’s: Deflationary Plunge in Bond Yields Imperil Pension Plans
The article discusses the impact ultra-low interest rates will have on corporate pension plans and balance sheets. It features CT Capital’s anlysis that a decline in bond yields can be as devastating to a savings plan as a drop in the stock market. Kenneth Hackel, president of credittrends.com estimates that a 1% cut in a retirement plan’s assumed rate of return is roughly equal to a 15% decline in stock prices. In line with Hackel’s rough calculation, Fitch Ratings reckons a 1% cut in the assumed discount rate for companies’ DB plan can result in a 10%-20% increase in the present value of future liabilities.
August 19, 2010: CNN Money: Intel’s McAfee buy is a Buffett-like play
Ken provides his perspective on the acquisition: “Everyone’s focusing on how expensive it was, but with this deal, Intel’s cash flow is growing, its balance sheet stays clean, and the capital is at a very low cost,” said Ken Hackel, president of CreditTrends.com and author of Security Valuation and Risk Analysis. “This gives Intel a positive spread over what it’d earn ordinarily by investing in the slowing PC market or holding onto its cash.”
Hackel estimated that Intel’s total cost of capital on the McAfee purchase would be about 4%, but the cash return on its invested capital would probably be around 8%.
August 11, 2010: Forbes Online: Corporate Pension Bomb Set To Explode
Earnings to take a big hit as firms are forced to top off unfunded pension plans.
July 29, 2010: Forbes Online Added Ken Hackel’s Article, “Dudley Off To A Shaky Start at BP”, to its Site
Ken believes that the announcement of a possible dividend re-instatement, coincident with a disclosure of up to $30 billion in asset sales, hardly makes economic sense. He recommends that BP management should not even think about a dividend until it is relatively certain of its final liability—and that will take some time.
July 28, 2010: Forbes Online – Why Corporate Dividends Are A Sign Of Weakness
Ken presents his analysis of why dividends do nothing to enhance long-term shareholder value. If anything, he asserts, they send a signal that management has failed to find better uses for cash. He suggests, that with free cash flow valuation multiples currently suppressed, firms that have the financial flexibility should seriously consider acquisitions within their core areas of competency. Such acquisitions will add to returns on invested capital and enhance shareholder value.
July 27, 2010: Wall Street Journal – WSJ Market Beat Blog: GE Shares Gain Again On Dividend, Share Buyback
In a follow-up to his earlier comments in a WSJ Market Beat Blog on share buybacks and dividends, Ken argues that dividends don’t reward shareholders in the long-term and is only a good move when management is “sub-par” and doesn’t have any better ideas on how to spend it.
July 27, 2010: Business News Network: Impact of Senior Management Changes at BP
Canada’s BNN interviews Ken on the likely impact of changes in BP’s senior management in 2 parts
Ken’s full interview (beginning at approximately 03:45 into tape:
July 26, 2010: Wall Street Journal – WSJ Market Beat Blog: Dividends – Good Sign or Management out of Ideas?
Ken Hackel argues that dividends don’t reward shareholders in the long-term and is only a good move when management is “sub-par” and doesn’t have any better ideas on how to spend it.
July 22, 2010: Barron’s Article: Economic Benefit of Share Buybacks
Article presents Ken Hackel’s discussion of benefits of share buybacks: they may boost GAAP EPS but not necessarily economic return.
July 23, 2010: CNBC Interview – Are Buybacks Good for Shareholders?
Ken Hackel discussed whether or not buybacks are good for shareholders on CNBC’s The Call.
July 13, 2010: CNBC Feature – Alcoa’s (AA) Earnings Not As Rosy As It Seems?
CNBC’s Herb Greenberg featured Ken Hackel’s analysis of the impact to prior quarter’s free cash flow of the transfer of $600 million of stock—not cash—in a master trust for the company’s pension fund.
July 12, 2010: Credit Trends Interviewed by Pensions & Investments
Credit Trends was interviewed about BP’s pension plan by Pensions & Investments Magazine.
July 8, 2010: CNBC Strategy Session – Underfunded Pensions Earnings Bombshell
Herb Greenberg featured Ken Hackel’s recent commentary on the potential impact of pension underfunding on corporate earnings.
May 7, 2010: Interview with M&A Alerts
Ken Hackel interview with M&A Alerts regarding his views on targets, and specifically particular companies that are targeted by cash rich king Apple Computer, Inc.