The biggest buy-in of 2024 so far includes a deferred premium arrangement and the in-specie transfer of illiquid assets.
The £1.3bn buy-in means that the scheme – sponsored by global threads and materials manufacturer Coats Group – is now fully insured, following a £350m buy-in with Aviva, completed in December 2022.
The transaction included the transfer of illiquid assets directly to PIC. In addition, the scheme and insurer agreed a deferred premium arrangement for part of the deal, allowing other illiquid assets to be redeemed.
Coats has contributed £70m in cash contributions to secure the deal, along with a £30m loan.
Jackie Callaway, chief financial officer at Coats Group, said the transaction “neatly aligns shareholder interests… with those of scheme members”.
She also highlighted that the scheme had successfully moved from a deficit of more than £600m in 2016 to being ready for an insurance transaction eight years later. It merged its three defined benefit schemes together in 2018, before securing its first buy-in in 2022.
“The completion of the buy-in reflects the constructive and collaborative working relationship between the group and the trustee and I would like to thank everyone involved for helping us get to this position, which will benefit all stakeholders,” Callaway added.
Chris Martin of Independent Governance Group, who is chair of the scheme’s trustee board, said Coats’ internal pensions team was “critical to delivering this outcome”, as well as ensuring “continuity of service to members”.
He also thanked PIC for its “innovative, flexible approach to addressing the complexity of the illiquid holdings”, as well as advisers including LCP, Redington and Sackers.
Matt Richards, head of origination structuring at PIC, added: “One notable feature of this transaction was the active support from Coats as sponsor, reflecting their experience of positive sentiment achieved by aligning shareholder and scheme member interests.”
Equity analysts at brokers Peel Hunt and Jefferies reacted positively to the news of the transaction, saying it improved the “investment case” for Coats by boosting its future growth prospects.
The year’s biggest transaction comes after data from the first half of 2024 showed a marked slowdown in large deals when compared with 2023.
Further reading
Coats UK scheme agrees £350mn bulk annuity deal with Aviva (6 December 2022)
How schemes are solving illiquid asset issues (20 May 2024)
PIC seals biggest buy-in of the year with £1.2bn TotalEnergies deal (3 July 2024)
