L&G completes £325m buy-in and bond deal with Heathrow pension scheme

Written by Talya Misiri

Heathrow has completed a £325m buy-in of its BAA Pension Scheme with Legal & General, it has announced.

The transaction covers 1,300 pension members and was accompanied by an investment in a long dated, index-linked £160m bond issued by Heathrow Airport Limited to L&G. The bond added to L&G’s £60bn annuity book and allowed Heathrow to strengthen its long-term, global financing platform.

Heathrow was advised by KPMG, Mercer, Redington and CMS. The deal enabled Heathrow to de-risk its legacy pension obligations and provide security for scheme members’ benefits.

Legal & General Retirement Institutional CEO Laura Mason said: “This innovative transaction has generated genuine value, allowing Legal & General to deliver an attractive premium to the scheme while enabling Heathrow to achieve the financing it needed. The transaction highlights our ‘solutions driven’ approach towards complex client requirements, allowing all parties’ needs to be met.

“Legal & General will continue to invest strategically in UK assets and infrastructure to support the pension promises that we take on from companies in the UK. We look forward to supporting the trustee in future to secure more of their members’ benefits.”

Heathrow chairman of the scheme trustee Phil Wilbraham added: “I am delighted with the completion of this innovative transaction with Legal & General, which at the same time de-risks the position of our scheme members, enables Heathrow to strengthen their financing position ahead of our airport expansion and provide access to competitive financing for the benefit of passenger and airline customers“

Mercer head of risk transfer Andrew Ward and lead adviser on the transaction noted that the deal was “ground-breaking” and L&G and Heathrow had secured “attractive pricing and a robust contract”.

KPMG head of pension insurance Tom Seecharan, who advised on the bond and de-risking strategy also commented: “In a market where lots of good transactions are happening, this brilliant solution really stands out. We are very proud to have supported in devising the strategy to de-risk at an opportune time and then to make a good outcome even better through achieving, for the first time, the bespoke design and implementation of a bond alongside a vanilla buy-in. A genuine win-win for all parties.”

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