We will take part in restructuring if it means the return from the employer will be better than if the business had been simply left to fail.
It usually involves removing the pension debt from the company, allowing it to continue to trade with a positive cash flow and potentially make a profit.
When we’ll take part in restructuring
We can only take part in restructuring or rescue if the proposal meets specific criteria.
These principles are designed to make sure that the pension scheme is in a much better position than it would have been if we had done nothing.
Our guidance booklet, Guidance on the PPF’s approach to employer restructuring, provides detailed information on our principles along with an example of how we apply the criteria.
Standard documents for restructuring
Among other requirements, as part of any restructuring, we’ll require cash and an equity stake to protect our own interests and the interests of the scheme.
We’ve prepared a suite of standard documentation to facilitate this.
Any company or group of companies proposing a restructuring should be prepared to enter into these documents. If they’re not prepared to do so it will probably prevent a restructuring, so it’s important to highlight this as soon as possible.
Our strong preference is that mitigation should be provided in cash on or before the date of the restructuring becoming effective. In exceptional circumstances we may accept secured loan notes as part of the mitigation in addition to the cash.
Download our standard restructuring documents
Sets out the relationship between the shareholders and how they’ll deal with each other. Among other things it will govern any material changes to the business, e.g. borrowing, increases in salary/benefits and bonuses for the directors/senior management etc.
Articles of association
The new Articles we require the company to adopt to provide us with the protection we require
Loan note agreement
In rare situations if it’s not possible for the proposer to pay all the cash required on completion, we may consider deferring with loan notes, usually when accompanied by supporting security and, where appropriate, an inter-creditor deed following the requirements in our guidance.
Security documents in support of loan notes
Any deferred consideration should rank ahead of general creditors for repayment, which is achieved through taking this security; often in the form of a mortgage debenture.
Inter-creditor agreement guidance
Guidelines on what this should include. It will govern how the various creditors of the company will deal with each other, including giving notice of any enforcement action they’ll take.