GERMANY – German industrial group ThyssenKrupp has had its long-term corporate credit-rating downgraded two notches to BB+ as a result of its unfunded pensions liabilities, despite in-depth dialogue with ratings agency Standard & Poor’s.

ThyssenKrupp has “sharply criticised” the decision by S&P, claiming that its financial situation has not changed since its first rating was issued in 2001. The group did report a substantial 7.1 billion euros of provisions for pensions and similar obligations at the end of September 2002, but gave S&P a detailed report of its pension funding situation in December.

The German group has issued an angry statement saying: “The facts concerning ThyssenKrupp have not changed; the only thing that has changed is S&P's view of the way it assesses pension obligations.”

S&P remains firm, however, having warned ThyseenKrupp of a two-notch downgrade already.

"The rating actions reflect Standard & Poor's treatment of unfunded pensions as debt-like in character," explained Standard & Poor's credit analyst Olivier Beroud.

"Including unfunded pensions in the calculation of the group's indebtedness, credit protection measures are weak, with funds from operations to net debt (including pensions) of about 15%, and pension-adjusted debt to capital of more than 60% for the fiscal year ended Sept. 30, 2002," he added.

Several other European corporates are awaiting an outcome from S&P after seeing their ratings put on negative creditwatch as a result of unfunded pensions liabilities. For ThyseenKrupp, however, the resulting downgrade means a move from investment grade to sub-investment grade for its bonds.