Your message is not as well considered as your usual contribution. Lucent's pension was 17% or $5.2B OVERFUNDED at the end of FY01. While performance over the last 12 months was likely in the range of -20% or so, LU's expected obligation likely also declined with the divestments and force reductions over the same timeframe. Indeed, leaving the 9% return assumption aside for the moment, LU's pension fund obligation may not be underfunded AT ALL, much less severely underfunded in billions of $$ as you have unequivocably stated.
The obligation hasn't changed much at all. Look at the Postretirement and postemployment benefit liabilities line. At the end of FY01, that number was $5.48 billion. At the end of FY02, the number was $5.23 billion. Just three months ago, on 30 June, the Pension Liability was $125 million. At the end of FY02, announced today, the Pension Liability was $2.75 billion. They're underfunded, in billions. You need to connect the dots on the balance sheet, but it will be rather clearly stated once the 10-K comes out.
edit: On the conference call they just stated that they're $2.8 billion underfunded, and made a $2.9 billion charge to equity for the pension fund obligation.
IMHO The biggest threat to existing shareholders is the dilution of the convertible NOT involuntary bankruptcy.
The convertible dilution has already happened. The market's already discounted that. Looking forward, I doubt there will be any more convertible issues. More important to me now in making a buy/sell judgement on the debt or equity is judging the probability of an involuntary bankruptcy. |
