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Cessation of TPR regulatory action for two pension schemes

• 16 Dec 2016
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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:

1. 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
2. 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

ENDS