Summary
AT&T Inc. announced on October 18, 2012, its intention to contribute a preferred equity interest in its wireless business, AT&T Mobility II LLC, to the trust that manages its pension benefit plans. This in-kind contribution is valued at approximately $9.5 billion and aims to significantly improve the funded status of AT&T's pension liabilities, which exceeded trust assets by $10.2 billion as of December 31, 2011. The company is seeking approval from the U.S. Department of Labor for this transaction, with a target completion by the end of 2013. The preferred equity interest will provide cumulative cash distributions of approximately $560 million annually to the trust. While this move is expected to bolster the financial health of the pension plan, AT&T anticipates no material impact on its diluted earnings per share or cash flows from operations, aside from potential tax deductions. Furthermore, the company stated that this transaction is not expected to affect its ability to pay or increase its dividend or execute share repurchase programs.
Key Highlights
- 1AT&T plans to contribute a preferred equity interest in its wireless business (AT&T Mobility II LLC) to its pension trust.
- 2The estimated fair market value of this in-kind contribution is approximately $9.5 billion.
- 3The contribution is intended to significantly improve the funded status of AT&T's pension plan, which had a deficit of $10.2 billion as of year-end 2011.
- 4Approval from the U.S. Department of Labor is required, with AT&T aiming for completion by the end of 2013.
- 5The preferred equity interest will provide cumulative annual cash distributions of approximately $560 million to the trust.
- 6AT&T does not expect a material impact on diluted EPS or cash flows from operations, excluding tax benefits.
- 7The company anticipates no impact on its ability to pay dividends or conduct share repurchases.