Chilled convenience food group Uniq has announced that a proposed restructuring to resolve a legacy pension deficit has been cleared by The Pensions Regulator.

Subject to shareholder approval and the sanction of the High Court, the restructuring would see the pension scheme take a 90.2% shareholding in the company, while accepting a cash payment of £14 million less certain expenses.

The trustee and the Pension Protection Fund have stated their intention to review opportunities and strategies to realise all or part of the 90.2% shareholding, Uniq said.

In a statement, Uniq said the move would remove the company’s “substantial pension buy-out deficit” of more than £400 million.

Existing shareholders will retain a 9.8% holding in the company following the restructuring, which would see Uniq move its share listing to the AIM in line with listing rules.

Uniq chief executive Geoff Eaton said gaining the Regulator’s clearance for the restructuring was the result of more than 18 months’ hard work.

“The pension solution will release the business from the huge legacy pension burden, while realising the best possible outcome for pension members and achieving some value for our shareholders,” Eaton said.

Commenting on the development, Martin Scott, partner at law firm Mayer Brown’s pensions practice, said that companies are “shouldering the burden of hefty legacy pension deficits”, but it is the scale of the mismatch which makes this case so significant.

“The basic structure of the compromise is not that unusual. It uses a regulated apportionment arrangement to move the pension debt away from the operating companies to a Newco. It also involves giving the trustees/PPF a shareholding. What is different here is the size of the shareholding - the PPF usually only insist on a 33% shareholding. It is going to be interesting to see if the price of doing deals in the future will mean shareholders having to give up more equity,” Scott said.

Pensions credit advisory partner at PwC Jonathon Land said the solution is not surprising, characterising the move as a sensible commercial approach mirroring the way banks behave when faced with “similar issues.”

“We expect to see other similar transactions being proposed. However, these transactions are extremely complex, requiring agreement from a number of parties, and as such we are unlikely to see a sudden wave of these deals,” Land said.

Meanwhile, managing director in Lincoln International’s pensions advisory team Alex Hutton-Mills said the solution may represent a “least-worst” outcome for all parties.

The case does raise a broader question about how the Regulator operates where there is “little realistic prospect” of companies clearing their pension deficits, Hutton-Mills said.

“It will be interesting to see whether TPR issues a statement or guidance around the application of this type of solution given its desire to limit employers’ ability to unjustifiably break the link with their pension schemes.”

Share Story: