The ten fund managers for Belgacom’s E3.6bn pension fund are to lose their mandates as the assets are handed over to the state.
Formal agreements have now been made to transfer the assets of the Belgacom pension fund to the state in preparation for an initial public offering of the company next year.
The managers affected are Barclays Global Investors, Capital International, Fortis Investments, Goldman Sachs Asset Management International, LaSalle Investment Management, Lombard Odier Darier Hentsch, Putnam Investments, State Street Global Advisors, Wellington Management Co and BlackRock.
Jan Verbrugge, of Fortis Investments commented that the risk of the IPO and therefore the transfer of pension fund assets had always been there, so Fortis was fully aware of what may happen. The other fund managers that were contactable declined to comment.
The privatisation of the Belgian telecoms operator has been under discussion for some time, but the issue of the underfunded pension fund and its E5bn of liabilities had raised concerns. In order for an IPO to be attractive, analysts said that the state would have to take on the pension fund.
After negotiations between the state and Belgacom it was formally agreed that the pension fund obligations would be transferred to the state by the beginning of 2004, in preparation for an IPO in 2004.
Once legislation has been submitted to parliament, the state will assume the legal pension obligations for the company’s current and former statutory employees as of January 1 2004.
With regards to covering its liabilities, the two parties said in a statement: “On or before 31 December 2003, the state will receive from Belgacom an amount of cash equivalent to the obligations for pension rights accumulated up to 31 December 2003, which have been valued at E5bn.
“To finance this payment, Belgacom will sell the assets of the company pension fund before year-end and the difference between these sale proceeds and the value of the obligations as at 31 December 2003 will be financed through borrowings with minimal impact on the company’s financial strength.”
A spokesman for the fund said that the process of cashing in the assets is not being commented on, but said it would be carried out in a prudent manner so as to obtain full value.
The statement: “With respect to the future pension rights that statutory employees will acquire from 1 January 2004, Belgacom will continue to make ongoing contributions to the state. In this way, the pension obligations will be transferred to the state on a fully funded basis.”
While current and future pensioners remain unaffected, the liquidation of the pension fund naturally means that the jobs of the roughly 10 employees are under review. The fund spokesman said that work would be extremely busy for the next few months, and then the jobs would be looked at on a “case-by-case” basis.
Dieter Bellens, chief executive officer and president of Belgacom, said that the transfer of the pension fund will “put Belgacom on an equal footing with respect to other operators. Above all, it will take away a factor of volatility from the financial results of Belgacom.”
The fund was created in 1995 and first appointed managers in 1996.