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Implications of
merging a UK parent company with a Dutch company

Case studies

The background

We advised the trustees of a pension scheme sponsored by a UK cinema operator in relation to the potential covenant implications of the combination of the employer's parent company with a Dutch based business in the same sector.

The merger was to be financed by the raising of additional debt, alongside a rights issue. One of the scheme's employers was to become a guarantor under the new debt facility (pre-combination, neither employer was a guarantor).

Our solution

We advised the trustees that this action weakened the covenant afforded to the scheme. However, the scheme was more than fully funded on a self sufficiency basis and the sponsor was concerned about trapped surpluses potentially occurring in the future.

By applying a proportionate approach, taking into account the trustees' obligations around the weakening of the scheme’s covenant whilst also recognising the sponsor’s concerns around a trapped surplus, we worked with all parties to recommend constructive mechanisms which would bridge the gap to buy-out, eg escrow accounts, letters of credit, etc.

Finding certainty in uncertain times

Finding certainty in uncertain times

Pensions de-risking report

How resilient has the buy-in, buy-out and longevity swap market been to Covid-19, and what opportunities are available to pension plans looking to insure their pension liabilities?

Download the report

How we can help

We help sponsors of pension schemes understand and manage the costs and risks associated with supporting their current and legacy pension schemes as well as other employee benefits.

We help trustees understand and monitor the employer covenant.

We help pension scheme trustees and sponsors to determine the ultimate destination for their scheme and help them put together a plan to get there, including how to effectively manage the risks they face along the way.

We help trustees achieve their strategic goals, with solution-led, appropriate advice.