Coats Group, a FTSE250 company, has concluded a £1.3bn (€1.5bn) buy-in deal with the Pension Insurance Corporation (PIC) covering the pensions of 18,042 scheme members.
The scheme has previously completed a buy-in in 2022 with Aviva, covering £350m of liabilities. The new transaction covers the remainder of the scheme.
As part of the transaction, Coats is making an upfront cash contribution of £70m to the scheme and a further £30m loan. The loan will help the scheme meet the PIC premium and provide cash until certain long-term assets are realised.
In order to manage the scheme’s complex illiquid asset holdings, PIC received illiquid assets in specie and agreed a deferred premium to allow timely redemption of further illiquid holdings.
LCP acted as lead transaction consultant. PIC received legal advice from Herbert Smith Freehills, while the trustees received actuarial advice from LCP, legal advice from Sackers and investment advice from Redington. The company advisors were Isio and Baker McKenzie.
Chris Martin, chair of the trustee of the Coats UK Pension Scheme, and executive chair at Independent Governance Group, said: “This is a significant transaction for the scheme members, who now all have their pensions guaranteed by a UK life insurance company, and for the sponsor, which has fully de-risked the pension scheme for which it is responsible.”
He also thanked PIC for its “innovative, flexible approach to addressing the complexity of the illiquid holdings”, as well as advisors LCP, Redington and Sackers for their support throughout.
“Critical to delivering this outcome and the continuity of service to members has been the outstanding team at the Coats Pensions Office,” Martin added.
Jackie Callaway, chief financial officer at Coats Group, said: “Shareholder sentiment was overwhelmingly positive following the previous scheme buy-in and we were therefore very pleased to be able to help facilitate this transaction.”
He said that Coats’ contribution “neatly” aligns shareholder interests, by removing sponsor responsibility for the scheme’s assets and liabilities, with those of scheme members, who now all have their pensions insured.
Matt Richards, head of origination structuring at PIC, said that one notable feature of this transaction was the active support from Coats as sponsor, reflecting its experience of positive sentiment achieved by aligning shareholder and scheme member interests.
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