Manitoba Telecom Services (MTS) expects to contribute $130 million to its pension plan and repay $70 million in short-term indebtedness it incurred in February to pre-fund the company’s pension obligations.
MTS will use part of the proceeds from the sale of its Allstream division, which was announced Friday, to reduce the deficit.
The company believes these prepayments into its pension plans should eliminate all pension solvency funding until 2016, assuming no change in long-term interest rates.
“After giving effect to these contributions, the MTS pension plan’s solvency funding ratio will be approximately 85%,” the company says in a statement.
As part of the transaction, MTS has agreed to retain the pension obligations and related pension plan assets in respect of retirees and other former Allstream employees under Allstream’s current DB pension plans. Allstream will retain such plans in respect of current employees.
MTS estimates the net present value of its remaining obligations to these Allstream pension plans at about $87 million, to be incurred over five to seven years. The company expects to deposit $40 million into these plans at the close of the transaction, after which it expects no further solvency funding requirements until 2016.
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