UK - Trustees trying to reach "Bradstock agreements" with their struggling scheme sponsors are playing a high stakes poker game which could backfire, lawyers claim.
Under Bradstock deals, schemes waive the full amount they are entitled to from sponsoring employers in a bid to keep firms from going into liquidation.
However, lawyers warn that trustees must be wary when negotiating deals with their sponsors, as the deals could collapse leaving them with no additional funds.
And they point to events at shoe manufacturer FII, which was due to raise cash through the equity market. Under the terms of its Bradstock deal with trustees, the firm would have put £2.8m of the proceeds – equivalent to 10% of its deficit – into the £49m scheme.
However, the deal has been thrown into doubt after two shareholders – who control over 25% of its equity – objected as it would dilute their holdings. The pair have submitted their own proposals to keep the firm going and FII’s adviser, Beaumont Cornish, warned that the trustees could object and scupper the deal.
Dickinson Dees partner Martin Jenkins (pictured) said: “This is like playing poker. What’s the right amount to settle for and when do you stand up from the table?”
“If a company tells the trustees it can only pay £1m and they push for £1.3m, it could go bust and they’ll end up with MFR rather than full buyout.”
Maclay Murray & Spens partner Gary Cullen said:
“The difficulty for trustees is whether the company is likely to go into liquidation before the Pension Protection Fund is launched. There is no point in saying ‘We’ll hold on, we won’t do any deals, because come April 2005 there’s the PPF,’ if the company goes bust before then.”
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