“… if a company with unfunded pension plan liabilities were to go bankrupt, it would be required to pay any pension deficit from the company’s assets before paying secured lenders, bondholders or other creditors’ claims,” the report said.
And, the complexity of assessing unfunded liabilities in the midst of a bankruptcy could also delay payouts to lower-ranked creditors, it noted.
As a result, this new treatment for pension liabilities “will increase expected losses for all debt instruments with lower payment priority, and will potentially lower their ratings,” it said.
In turn, this may impact companies’ access to funding, the report suggested.
“Private-sector companies with unfunded DB pension…