Marks & Spencer, the ailing British food and clothing retailer, is following the example of General Motors and raising 400 million in the bond markets to cover its pension-fund deficit. The company says the fund-raising will raise the funded share of the pension fund from 82% to 94%. An actuarial valuation identified a 585 million shortfall.
“By taking this action, we are providing reassurance to the scheme members,” Finance Director Alison Reed announced in a statement. “This is an opportune time to raise the funds, taking into account current interest rates and demand in the corporate bond markets.”
Pension-fund deficits at members of the benchmark FTSE 100 Index peaked at about 45 billion last year before stock markets started to recover. Bond issues offer an answer. However, investors may balk at them, arguing that they invested in the business, rather than its employee benefits programme, or an investment fund.