The BBA Income and Protection Fund stands between the sale of its sponsoring employer BBA Aviation’s sale of subsidiary Ontic to CVC Fund VII.

BBA Aviation, a provider of global aviation support and aftermarket services announced today 30 July, that it intends on selling Ontic, a provider of OEM-licensed parts for legacy aerospace platforms, for £1.12bn on a cash free, debt free basis.

However, in order for the transaction to go ahead, the trustee of the BBA Income and Protection Fund, needs to agree with the company to agree an alternative funding solution to the current asset-backed funding arrangement that it has secured against Ontic’s assets.

“The board notes that active and deferred members of the company’s current UK defined benefit pension fund relate primarily to the retained group. The company will work with the pension trustee to agree an alternative funding solution to the current asset-backed funding arrangement, as part of the current asset backed funding arrangement that is secured against Ontic’s UK assets and release of this security will be required in order for the transaction to complete,” BBA Aviation stated.

“The company will also work with the group's pension trustee to obtain its consent to release applicable security.”

BBA purchased Ontic in February 2006 for £55m and has expanded the subsidiary through acquisitions of licences for aircraft parts.

BBA Aviation said the transaction has been unanimously supported by its board as being in the best interests of the shareholders. However, the sale is conditional upon the approval by the group’s shareholders and various other approvals, which includes the consent of certain group lenders or replacement of certain financial indebtedness, and the consent to the release of applicable security by the group’s pension trustee. Completion is expected in Q4 2019.

Its annual report for 2018 revealed that the group paid net £4.9m of pension payments during the period, of which £3.3m represented pension deficit payments reflecting the agreed payments to the schemes. As at 31 December 2018, the accounting net deficit across the UK and US plans was £23.2m (2017: £59m).

The actuarial valuation of the BBA Income and Protection Fund, which closed to future accrual in 2016, as at 31 March 2015 found a funding deficit of £44.5m. The scheme has also completed a series of buy-ins with Legal and general since 2008.

“The annuity is an investment of the scheme, and all pension liabilities and responsibility for future pension payments remain with the scheme. The income from the annuity matches the payments to be made to the pensioner members it covers and removes mortality risk in relation to those members which are the subject of the annuity purchase,” it stated in its annual report.

A spokesperson for The Pensions Regulator said: “We do not comment on individual cases unless it is appropriate to do so.”

Pensions Age has contacted the BBA Income and Protection Fund scheme secretary, Ross Trustees, but it is yet to respond.

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