We also have experience of Buy out contracts. In one case, the company was in danger of insolvency unless its bankers agreed a debt for equity swap. The banks would not proceed with the transaction unless the pension scheme was bought out completely. We recognized the need to compromise, or the members would pass to the PPF on insolvency. An agreement was reached that the banks would pay a fixed monetary amount to the pension scheme which would enable the scheme to be bought out at a level guaranteeing all members less than full entitlements, but more than they would have received from the PPF.
This transaction needed innovation; commercialism; swift matching of assets to the portfolio requested by the preferred insurer and a willingness to recognize that the pension scheme was “between a rock and a hard place”. Either members became beneficiaries of the PPF or they received higher guaranteed benefits, albeit not full entitlements. We are not afraid to make difficult decisions.
