Media Companies' 2009 Pension Liability 'Modest' Relative to Cash Flow

November 3, 2008 ( - A new Fitch Ratings report asserts that most pension liabilities at U.S. media and entertainment companies in 2009 should be "modest" relative to cash flows.

A Fitch news release said it forecasts U.S. media & entertainment company pensions will produce a weaker underfunded status heading into 2009.

Findings of its analysis include:

  • The median funding level in the sector could potentially drop to below 80% (from 96% at the beginning of the year).
  • Most of the companies in Fitch’s portfolio will be above the initial 65% “At Risk” threshold as mandated by the Pension Protection Act (PPA); however, substantially all of them could be below the 2011 80% threshold based on Fitch’s assumptions.

“At this point, Fitch believes the majority of companies within the media & entertainment sector will be able to fully fund their plans over the next seven years without materially impacting their credit profiles,” the release said.  

Fitch expects CBS Corporation to continue to have the largest absolute underfunded pension liability in the sector. "As previously stated by Fitch, this does not represent a material credit concern, as a large portion (approximately $525 million) is related to non-qualified plans that do not need to be prefunded in accordance with the PPA and therefore should not represent incremental cash outflows over the intermediate term," the news release said.

Based on its analysis, Fitch expects Six Flags, Inc. The McClatchy Company (McClatchy), Hearst-Argyle Television, Inc. (Hearst-Argyle), and Belo Corp (Belo) to potentially have the highest percent of Funds Flow from Operations (FFO) needed to be allocated to pension contributions over the intermediate term. "Six Flags' over-leveraged balance sheet and the secular challenges faced by McClatchy could make it difficult for these firms to meet PPA requirements based on Fitch's assumptions,"Fitch analysts wrote.

The full report is available at . A free registration is required.