Pactiv drops on concern pension contributions will deplete cash

Pactiv Corp., the maker of Hefty garbage bags, tumbled the most ever in New York trading because of concern the declining value of pension-plan assets will require larger cash contributions in 2010.

Pactiv fell $2.93, or 19 percent, to $12.90 at 4:15 p.m. in New York Stock Exchange composite trading, the largest decline since the shares were sold to the public in October 1999.

Pactiv's pension plans were underfunded by $1.2 billion on Dec. 31, compared with a surplus of $17 million a year earlier, Lake Forest-based Pactiv said in a Feb. 27 regulatory filing. Pactiv said it will contribute $200 million, or $130 million after taxes, this year to help with "a significant contribution" that will be needed in 2010.

Pactiv may need to contribute $326 million after taxes, or $2.47 a share, in cash next year, assuming an 18 percent drop in pension-equity investments this year and a 3 percent gain in fixed income, Timothy Thein, an analyst at Citigroup Global Markets, said in a report. Pactiv's pension assets, 63 percent of which were invested in equities, lost $1.07 billion last year, the company said.

"We acknowledge the risk associated with pension, but still think the risk/reward at current levels is attractive," Thein said. He maintained a "buy" rating and lowered his stock-price target to $23, from $29.