De La Rue group companies that are guarantors to the British banknote manufacturing group’s principal bank facility agreement have entered into a guarantee with the De La Rue Pension Trustee that provides the scheme with an equal “pari passu” guarantor recourse ranking to the agreement.
The guarantee is part of a revised actuarial valuation and deficit contribution plan that will see the sponsor paying £57m less in cash contributions to the scheme.
The guarantee was agreed to enable the bringing forward of an actuarial valuation of the pension scheme as at 5 April 2021, rather than the originally scheduled date of 31 December 2022.
In addition, De La Rue said it had committed to engage with the trustee should the company be considering any significant transactions that may potentially lead to material detriment to the pension scheme, and the trustee will have a consent right where De La Rue incurs priority financial indebtedness beyond that permitted by its principal banking facilities.
The company also said it had confirmed its support in principle to both medium and long-term strategic objectives of the trustee in terms of partial buy-in/full buy-out of the scheme, “subject to appropriate pricing and commercial terms”.
According to the actuarial valuation as at 5 April, the scheme has a deficit of £119.5m (€144.2m).
This compares with a schedule of deficit repair contributions agreed with the trustee in May 2020 that totalled around £177m from April 2021 to March 2029.
De La Rue said that as a result of the new valuation, the scheme actuary had confirmed that the deficit could be funded through contributions remaining flat at £15m per annum from April this year to March 2029.
The company and the trustees have therefore agreed a new schedule that avoids an increase in contributions from £15m to £14.5m for the period April 2023 to March 2020. The company will instead make deficit repair contributions of £15m annually during that period.
Clive Vacher, chief executive officer of De La Rue said: “I am delighted that we have reached agreement with the Trustee that continues to honour the commitments we made back in 2020 to pay off the scheme deficit by 2029, and also introduces further substantial protections for members of the scheme.
“At the same time, a £57m reduction in cash contributions to the scheme will clearly benefit the group’s projected future cash generation.”
Today’s stock exchange announcement comes after a High Court judge earlier this year ruled in favour of De La Rue over how certain members’ deferred benefits should be revalued. The scheme’s liabilities would have increased by £20m if the representative pension member’s argument had been successful.
De La Rue pension scheme is a hybrid scheme comprising a defined benefit and defined contribution section. As at 5 April it had net assets of £1.1bn.
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