Transactional covenant support for investors
Pensions & benefits Employer covenant consulting
The background
Our client was a US based infrastructure fund which planned on acquiring a UK listed business with a defined benefit pension scheme.
Our solution
Our client had limited knowledge of UK DB regulations. Therefore we initially contributed to a wider pensions due diligence report focussing on the covenant support currently afforded to the pension scheme and the key facets of the pensions regulatory regime that the client should be aware of (for example TPR’s clearance guidance and the Contribution Notice test brought about by the Pension Scheme’s Act 2021.
We then considered the clients business plans for the sponsor and its proposed debt structure. This enabled us assess how the trustees may perceive the change in covenant and what requests for mitigation may be.
The results
Having undertaken the covenant analysis for the client, we advised on how they should interact with the trustees and what a reasonable first offer for mitigation may be (ie to minimise the risk of any regulatory intervention.
We participated in a number of meetings and negotiations with the trustees such that a fair agreement was reached as set out in a Memorandum of Understanding, The efficient approach that we recommended and executed meant that pensions did not become a barrier in the client’s wider deal processes.
Following on from the deal, we have been retained to provided pensions and covenant advice on an ongoing basis.
