Great Lakes trustees draw on our pensions expertise
19 July 2011
The trustees of the Great Lakes UK Limited Pension Plan have agreed a comprehensive funding package with the scheme's sponsoring group. As a result, the Pensions Regulator has discontinued proceedings for financial support directions (FSDs).
Burges Salmon LLP acted for the Great Lakes Plan's trustees. Our Pensions team is currently also involved in regulatory work on moral hazard clearance and a contribution notice, PPF entry and, through our trustee company, as Regulator-appointed independent trustee of the Telent Pension Plan.
The Great Lakes Plan has already received £30 million under the package and is due to receive a further £30 million over the next three years. Group companies, including the overseas parent, have also entered into security arrangements providing additional protection to the scheme in relation to its liabilities. The Great Lakes Plan has around 1,270 members and is sponsored by Chemtura Manufacturing UK Ltd (CMUK), a solvent and trading UK business. The trustees approached the Regulator with concerns about the security of the scheme after Chemtura Corporation, CMUK’s US parent, filed for Chapter 11 bankruptcy protection in early 2009.
The pension deficit on a ‘buy-out’ basis was estimated at £95 million. The Regulator investigated and in December 2010 issued a ‘warning notice’ against several target companies, including CMUK and Chemtura Corporation. The notice warned that the Regulator might in due course consider whether it would be reasonable to issue FSDs against the target companies. In May 2011, CMUK and Chemtura Corporation reached agreement with the trustees on a funding package. This meant that the process towards an FSD was halted before it reached the Determinations Panel stage. Partners Clive Pugh and Justin Briggs led our team. Clive Pugh noted the comments of Stephen Soper, executive director for DB regulation at the Regulator:
"In my view, as in the 2007 Sea Containers case, this is another example of the use (or potential use) of the FSD power assisting in securing additional financial support for a UK scheme from an overseas parent company. That’s good news for the 1,270 members of this scheme as well as Pension Protection Fund levy payers. A negotiated agreement is clearly preferable to having to take enforcement action and we urge sponsoring employers and their parent companies to engage positively with scheme trustees to ensure pension schemes have adequate security."
Clive Pugh of Burges Salmon adds: "We were very pleased with the agreed outcome and the substantial protection for members as a result.”