This was a ‘distressed’ case where we were asked to become involved due to the relationship between the Sponsor and the Trustee Board having completely broken down.
The Sponsor was a struggling consultancy firm in the energy industry, and had been on a downward trajectory for some time. Failure of the Sponsor was likely unless an innovative solution was found in respect of the Scheme.
The Trustees needed to offer an innovative solution that both enabled the business to make some critical investments to secure the long term future of the business, whilst ensuring that the security of members’ benefits were recognised as a priority and therefore the Scheme needed to be given a fair and balanced improvement in recoverability if the sponsor was unable to turn around.
We suggested that the Company convert its existing debt into a mixture of equity and loan notes. This proposal would give the business greater working capital both to invest in the business and to meet their Scheme obligations.
We then got all parties back around the table and talking again. Being able to articulate the rationale for the solution and explain how the outcome would benefit all parties was critical to the success of the process.
Part of the solution involved the partial de-risking of the Scheme’s investment strategy to align the risk more closely to the sponsor’s ability to support the Scheme and to reduce the uncertainty in hitting the Scheme’s future funding objectives. We also reviewed the existing advisers and helped get the costs of the Scheme under control.
The sponsor is now thriving again and the value to the Scheme as well as the security of members’ benefit has been greatly enhanced.