Cessation of TPR regulatory action for two pension schemes
16 December 2016
Coats, the world’s leading industrial thread manufacturer and a major player in the Americas textile crafts market, announces that it has signed heads of terms with the Trustees of the UK Coats Pension Plan and Brunel Holdings Pension Scheme. In addition, Coats has received written assurances from the UK Pensions Regulator (TPR) that it will cease its regulatory action in relation to these two schemes under the Warning Notices that it issued to Coats in 2013 and 2014, subject to binding Settlement agreements being concluded on terms consistent with these heads of terms and which are satisfactory to TPR.
Completion of the documentation and internal and regulatory steps required to finalise the Settlement is anticipated early in the New Year. The Coats Pension Plan and Brunel Holdings Pension Scheme represent approximately 90% of Coats' UK pension liabilities1 and schemes’ members.
Coats has made proposals to the Trustees of each of the three UK schemes (including the Staveley Scheme), on a comparable basis, comprising (1) upfront payments totalling £329.5 million ($415 million2) from Coats' parent group cash (inclusive of the agreed Recovery Plan contributions paid to the Brunel and Staveley schemes since 1 January 2016); and (2) annual deficit recovery contributions totalling £17.5 million ($22 million) including estimated administration expenses and levies.
The principal commercial terms of the Settlement with the Coats Pension Plan and Brunel Holdings Pension Scheme are:
· Financial support on the basis of a combined technical provisions deficit as at 1 April 2015 of £485 million ($611 million) to be repaired by:
a) upfront payments totalling £255.5 million ($322 million) from Coats' parent group cash paid directly into the schemes (inclusive of the agreed Recovery Plan contributions paid to the Brunel scheme since 1 January 2016); and
b) annual deficit contributions totalling £14.5 million ($18 million), including estimated administration expenses and levies to be paid until 2028.
· The schemes will have access to sponsor support from Coats for future funding needs together with a Company guarantee.
· The next triennial valuation date for these schemes is to be 31 March 2018.
Once Settlement with the Coats Pension Plan and Brunel Holdings Pension Scheme Trustees is completed and TPR has ceased its regulatory action in respect of those two schemes, the Board will lift its previously announced restriction on distributions and its dividend policy will be announced in due course.
The Trustee of the Staveley scheme has not to date accepted Coats' proposal regarding that scheme and currently TPR’s investigation in connection with that scheme remains open. The proposal remains open to the Trustee of the Staveley scheme and the remaining parent group cash will be reserved for this purpose.
Mike Clasper, Chairman, said: ‘This is a good outcome for all parties involved. We have consistently stated that we would do the right thing by our pension scheme members balancing the interests of all our stakeholders. I believe what we are announcing today does just that. The settlement allows us to pay dividends to our shareholders, whilst retaining sufficient cash to continue to invest in growth opportunities. At the same time, we remain committed to fulfilling our continuing obligations to our pension schemes and their members and concluding a settlement for the Staveley Scheme. Coats can now fully focus on growing the business for the benefit of all its stakeholders.’
1. IAS19 liabilities as at 30 June 2016
2. US dollar figures at 14 December 2016 closing GBP:USD rate of 1.26
For more information contact:
Richard Mountain, FTI Consulting
T: +44 (0)20 3727 1374
Kristina Blissett, Head of Communications email@example.com
T +44 (0)208 210 5084, M +44 (0)7714 539887
Notes to Editors
For further information on The Pensions Regulator visit: www.thepensionsregulator.gov.uk
Background to UK Pensions Regulator investigations
During 2013 tPR began investigations into Guinness Peat Group’s (as Coats Group plc was then known) three UK pension schemes. In December of that year tPR issued Warning Notices on the two legacy schemes, Brunel and Staveley, and in December 2014 issued a Warning Notice on the Coats UK plan. During 2015 the Company was renamed Coats Group plc, a number of Director changes were made and all parties proceeded down a legal process set out by tPR regulations. In February 2016 Coats initiated settlement discussions with the three sets of trustees and committed to retain the entire parent group cash balance within the Group to support the schemes. The cash balance is the net proceeds generated from Guinness Peat Group’s asset realisation programme between 2011-2013 when it sold its share in approximately 50 businesses leaving Coats as the only remaining operating business.
Coats is the world’s leading industrial thread manufacturer and a major player in the Americas textile crafts market. At home in more than 60 countries, Coats employs 19,000 people across six continents. Revenues in 2015 were US$1.5bn.
Coats’ pioneering history and innovative culture ensure the company leads the way around the world: providing complementary and value added products and services to the apparel and footwear industries; applying innovative techniques to develop high technology Speciality threads and yarns in areas such as automotive and fibre optics; and extending the crafts offer into new markets and online.
Headquartered in the UK, Coats has a premium listing on the London Stock Exchange.
- Each year we make enough thread to go into 8 billion pairs of jeans - that’s one for every person on the planet
- Every month Coats produces enough thread to stretch all the way to the sun
- More than 450 million pairs of shoes are made every year using Coats’ thread
- More than 100 million car airbags are made using Coats’ Speciality thread every year
- In 1879 Thomas Edison used Coats’ thread in his experiments to invent the light bulb
- We’re experts in colour, last year we dyed thread and yarn in more than 150,000 different colours for our customers
- Our Red Heart knitting and crochet yarn brand has been named ‘America’s Most Recommended’ by the Women’s Choice Award
- Our flame retardant Speciality threads can withstand temperatures as high as 1,000 degrees Celsius
- Coats is the second largest supplier of zips to global brands