Background

The employer is a UK market leader in a niche manufacturing sector, and was the subject of a leveraged management buyout a number of years ago. The business has been highly profitable, and it has fully supported the defined benefit pension scheme which it sponsors.

In order to reward the management team and pay down deferred consideration, additional debt funding had to be raised by the employer from its existing bankers.

Action

The company management recognised that raising additional debt funding would have a negative impact on the position of the pension scheme. FRP’s Pensions Advisory team was instructed to assess the impact, and to recommend a structure that would address the issue by ensuring the scheme would be in the same position before and after the additional funding.

Outcome

We assessed the position, and worked closely with the management team to understand the debt transaction and the options available. We proposed a structure that provided the pension scheme with security, while allowing the employer to raise more debt funding and reward its management team.