FedEx to Borrow $1.5 Billion for Contribution to Pension Plan After Tax Changes

Victor J. Blue/Bloomberg News

FedEx Corp. is borrowing $1.5 billion to fund a contribution to its pension plan that it announced after the passage of U.S. tax law changes.

FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest North American for-hire carriers.

The company is selling bonds in as many as two parts, it said in a filing Jan. 29. The longer-term portion of the offering, a $1 billion, 30-year security, may yield 1.12 percentage points more than Treasuries, down from initial talk of around 1.3 percentage points, according to a person with knowledge of the matter, who asked not to be identified as the details are private.

RELATED: FedEx to spend $3.2 billion in tax reform savings on staff, operations

Memphis-based FedEx had projected obligations of $29.91 billion in its U.S. pension plan as of May 31, and the plan was 88% funded as of that date, according to its annual regulatory filing. Other companies like AbbVie Inc. and 3M Co. have also recently said they were boosting their pension contributions in light of the tax changes.

FedEx’s Chief Financial Officer Alan Graf said on a Dec. 19 earnings call that should the tax changes pass, the company would use some of the savings to make additional pension fund contributions. U.S. President Donald Trump signed the tax bill into law on Dec. 22. Last week, FedEx said its voluntary contribution would be $1.5 billion.

Morgan Stanley, Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the bond sale, the filing said.


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