Discussion in 'UPS Discussions' started by AAA RATING GONE, Dec 20, 2007.

  1. NEW YORK, Dec 20 (Reuters) - Moody's Investors Service on Thursday cut its ratings on United Parcel Service Inc (UPS.N: Quote, Profile, Research), leaving only five non-financial U.S. companies retaining their highest rating.

    Moody's cut UPS' senior unsecured debt two notches from "Aaa" to "Aa2," the third highest investment grade, citing the company's higher debt to fund the withdrawal from a pension plan as well as continuing shareholder enhancement plans.

    The downgrade leaves Automatic Data Processing Inc (ADP.N: Quote, Profile, Research), Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research), Exxon Mobil Corp (XOM.N: Quote, Profile, Research), General Electric (GE.N: Quote, Profile, Research) and Johnson & Johnson (JNJ.N: Quote, Profile, Research) as the only U.S. companies outside of the financial sector still holding the highest investment grade rating from Moody's.


    The amount of the payment required to withdraw from the MEPP was considerably larger than Moody's had anticipated when UPS was rated "Aaa", the credit ratings agency said.
  2. over9five

    over9five Senior Member Staff Member

    It's a sad thing. Used to be a huge bragging right.
  3. Channahon

    Channahon New Member

    Things may get worse from a financial rating, as our next CEO Scott Davis has already made the statement "he's not in love with a AAA rating."

    Now he may have said this knowing the rating would be lowered due to the MEPP buyout.

    Just have to wait and see how he does, he does have a financial background.
  4. Stock Holder

    Stock Holder Guest

    Does the market care about our rating? Ok, then neither do I. There are thousands of public companies out there with lesser ratings and increasing stock prices. I want to see Davis make some unconventional moves, because what we've been doing hasn't been working.

    If we give Davis as long as we gave Eskew to move the stock price then we're a bunch of dummies that will get exactly what we deserve. I'm supporting Davis for a year and if the stock hasn't moved it will be time to get an outsider that knows how to manage a public company.
  5. my2cents

    my2cents New Member

    Navigating the multi-employer waters will be challenging over the next several years. I believe Scott Davis was selected as next CEO because of his financial background and it takes one to throughly understand a pension report. Anyone who has spent any amount of time looking over an actuarial valuation report or an annual financial statement put out by a pension fund will know what I'm talking about.

    In addition to the downgrade in the company's credit rating, bargaining unit employees in other poorly funded plans will feel the pain as well. UPSers who are participants in the New England Fund for example, will probably have to forfeit most of the wage gains provided in the contract to bring this plan out of the critical funding level. At any rate, the buyout is set to take place on the day after Christmas for UPSers who are Central States participants.
  6. local804

    local804 Well-Known Member

    I hope he dont do to UPS what he did to OPL while an assigned CEO. I thought UPS`s claim to fame about the buyout was the huge savings it would have in the future? correct me if I am wrong. UPS international TANKED the first decade it was introduced but now is the prime cheese so to speak. The figured chart I seen with the savings UPS waoul;d save over the years with the pension buyout was titanic.

    In an investor webcast on 12/20/07, UPS revealed details of the newly ratified contract. Sixty-one percent of UPS teamsters will now be covered by a UPS pension plan. UPS expects the new Central State pension model (including the cost of the pension buyout) to be cost benefitial to the company in 2010. This is a shorter period of time than expected for UPS to payoff the buyout. In 2007 alone, the company expects to have a $2.3 billion reduction in income tax.

    Nineteen percent of UPS teamsters are in the 100% funded Western Conference pension plan. The remaining twenty percent are in various small local multiemployer plans. If any of these plans fall into "critical status" as defined by the Pension Protection Act of 2006, $.35 of the wage increase can be moved to pension contribution.

    Part-timers will be lumped into one UPS run health plan. And the eligibility for part-timers will increase to 12 month for the employee and 18 months for their dependents.

    Implimentation of wage increases will be equally split in August and February. Also it will now take 36months for a full-timer to reach top scale.
    Last edited: Dec 22, 2007
  7. moreluck

    moreluck golden ticket member

    The AAA rating enables a company to borrow $$$ a little cheaper. There's only a small handful of companies that maintain AAA rating.
    I don't think it will have much effect on UPS. There are many great companies out there with less than a AAA rating.
  8. There are many great companies out there with less than a AAA rating? Huh?

    The likes of ENRON etc maybe? An AAA rating means a lot. It puts a company into the Miss America contest, where everyone is beautiful. Having a strong balance sheet DOES decrease the stock value. The companies survival has just acquired an increased risk. Having a weaker balance sheet also increases the rate at which UPS borrows. The lowering of UPS' AAA rating makes them an ugly contestant. The stock is worth less and the cost of money goes up. Scott knows that. If he doesn't then he should be outed before he is ever inned.

    The rating change is a VERY BAD THING. Sell however much you can. The stock price is flatlined.
  9. local804

    local804 Well-Known Member

    hasnt it been for years?
  10. moreluck

    moreluck golden ticket member

    this is all very troll-like....."the sky is falling"

    Don't think so!!
  11. moreluck

    moreluck golden ticket member

    A debt rating of AAA is the gold standard — the cleanest bill of financial health — and means a company can borrow money at lower interest rates than those with less pristine credit ratings.
    The falling number is a dramatic sign of how companies' priorities have shifted to place greater value on growth over stability and how economic changes have made the top rating unobtainable or unnecessary.
    "To satisfy bond investors and shareholders, companies manage themselves more aggressively," says Diane Vazza, head of global fixed income for S&P.
    To put the erosion of AAA-rated companies in perspective, consider that 32 non-financial companies carried the distinction from 1980 to 1983, says Nicholas Riccio, credit analyst at S&P.
    Only General Electric and ExxonMobil have remained on the list since 1980, he says.
    There are several reasons for the decline in AAA-rated companies:
    More tolerance of risk. Companies are finding they can satisfy bondholders while pleasing stockholders even if they take on more debt than the AAA rating allows, Riccio says. "People look at (slightly lower) ratings differently (than before)," he says. Coca-Cola and 3M fell off the list because of strategic decisions they made, he says.
    Company-specific challenges. Bad things happen to good companies, making the AAA rating tough to hang on to. Merck, the most recent casualty, is an example. It lost its AAA S&P rating last November largely over concern about potential lawsuits over a recalled drug, Vioxx.
    Mergers. Five former AAA companies, most recently Amoco in 1999, were removed after being bought, Riccio says.
    Regulatory concerns. There's no better example of this than AIG, the nation's largest insurer, now snared in a scandal over its business practices. Its CEO, Hank Greenberg, stepped down this week amid the allegations, leading Fitch to have second thoughts about the company's AAA rating, says Julie Burke, managing director of Fitch's insurance rating group.
    Fitch had already added a "negative outlook" to its rating of AIG, indicating concerns. But it decided on a full downgrade after considering "recent events," Burke says.
    "Is this what you expect from (a) AAA company?" she asks.
    New industry dynamics. The rise of new technology is making it harder for companies to rely on mainstay products, Burke says. That forces companies to constantly invest in themselves to ensure that they are still relevant. Consider Kodak, which lost its AAA S&P rating in 1986, and its struggles to keep up in the digital world.
    Riccio, though, doesn't see the ranks of the AAA companies eroding much more. "The number is so small," he says.
  12. tieguy

    tieguy Banned

    I'm surprised to see we are borrowing money to pay this bill. Many of the anti contract posters here had led me to believe UPS would pay the 6.1 billion with their pocket change....:happy-very:

    Looks like a calculated gamble to me. Hopefully paying to get out of CS will help our people finally be able to plan on a secure retirement and protect UPS's long term viability against the CS plan folding. Though my understanding is a CS collapse would mean UPS would still be liable for the CS portion of an individuals pension disbursment . So if true then UPS is still not out of the woods by any means with this CS mess. As such this plan really has not done anything for us except get us out of funding the pensions of other retirees which some posters here still try to deny happens.

    I don't see any short term gains for us here.This is a long term win twenty or more years down the road. In the mean time ups will pay heavily for this fix.
  13. local804

    local804 Well-Known Member

    UPS expects the new Central State pension model (including the cost of the pension buyout) to be cost benefitial to the company in 2010.
  14. local804

    local804 Well-Known Member

    Calculated gamble or well planned move, depends what way you look at the coin, I guess. You know,and I know this move will save UPS millions of dollars over the future years, why still play clueless?
  15. moreluck

    moreluck golden ticket member

    Tieguy....UPS may or may not be borrowing for the CS rescue.. If they pay out of their own cash reserves, it still lowers their credit rating because now they have less funds in the coffer for future borrowing payments.
    Either way, I still don't think it's a "death-kiss" the way the unregistered poster does.
  16. tieguy

    tieguy Banned

    yep heard you the first time. Don't believe it. Sounds like ups tried to sugercoat this. No one will remember that ups said this in 2010. You keep looking for the money scam because of course you being a loyal 804 you don't believe in good corporate intentions. UPS is going to take a financial beating over this deal. The AAA rating which we always revered and always vowed to keep is the first foot. Soon we will announce revised earnings forecasts as we start to pay for this nightmare. In the meantime we will try to forecast potentially positive news 3 to 5 years down the road to sugercoat this stinking turd to the investors.
  17. tieguy

    tieguy Banned

    Unlike you I don't live in the deep wells of 804 so I don't share the bleak vision of life you folks love and revere.

    I think CS has always been a ticking time bomb. CS going down with ups a part of it would have been catastrophic. The buyout a little less catostrophic but still rife with risk and pain. I think UPS will sugercoat this any way they can. Try not to be so gullible.
  18. local804

    local804 Well-Known Member

    I am going to agree with you 100% on that one. From what I have seen in my career from the OPL 3 for 1 scam to the disapearing thrift plan, along with the way they treat thier employees, I dont see "good corporate intentions" at UPS anymore. Alot has changed since the IPO when the managers became millionaires with thier stocks. Alot more will change when we get our new fairless leader running the show. I also seen alot of top management people go to the dark side, and hell, we even had a division manager wallked away in cuffs.
  19. 2years2go

    2years2go \ Graduate member

    Just curious, Are most UPS management retirees selling all their stock once they retire? No growth in the last 5 years would lead me to beleive that they are. Those who I talk to are saying they will sell, take the cap. gains hit and invest in a profitable company. What are others doing?
  20. moreluck

    moreluck golden ticket member

    2years2go...I know a lot of them were told by their financial planners to sell stock, pay off debt (like house & any hypo loans, etc) so they can be relatively debt free.....and also to diversify.

    That "hit" that you refer to is harder to take than you might think.....if you sell stock to pay debt or to re-invest, you pay the IRS and then you have to sell more to pay the IRS this year and then sell more to pay the IRS next's a vicious cycle. Nobody wants to owe the IRS $20,000, $30,000, $40,000 or more every year.