UK - Shareholders are far happier for firms to have bank debts than scheme shortfalls, Mercer Human Resource Consulting claims.
High street retailer WHSmith has agreed a bank loan of £270m loan and will use £120m to help plug its £215m pension scheme deficit.
But Mercer senior consultant John Exley says bank debts are easier for shareholders to understand because they make deals more transparent and acceptable.
He said: “Bank borrowing is much better from a shareholder’s point of view. If a company wants to invest in new products, shareholders would rather it was done with new money rather than cash borrowed from the pension fund.
“It’s also far better for everyone if the debt is understood by investors. Bank debts are much easier to understand than deficit covenants.”
This week's edition of Professional Pensions is out now.
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