27th March 2019 Anne-Marie Winton comments in Pensions Expert on John Laing Pensions Fund divesting asset-backed funding from former sponsor
The John Laing Pension Fund has sold its remaining stake in infrastructure company John Laing Environmental Assets Group, a holding initially contributed to the scheme as part of a contingent funding plan in 2015.
John Laing’s stake in JLEN has always been a small component of its overall portfolio, but in situations where the employer offer is more substantial, care must also be taken to avoid breaking self-investment rules.
UK schemes must not hold a stake – whether through loans or direct equity – that amounts to more than 5 per cent of their overall assets.
Anne-Marie Winton says that “The regulator does put that marker down and say, ‘Just be careful that you don’t accidentally have an employer-related investment’,”
Anne-Marie says John Laing’s is the first case she has seen of a scheme unwinding its alternative funding. This exchange of alternative funding for cash is a regulatory necessity but is yet to be proven in many cases.
She went on further to say that “It kicks the tyres on how good the drafting was in the first place,”.
Anne-Marie concluded that the majority of deals are likely to have already been done, and adds that the solution fits schemes with “a pretty robust covenant anyway”, where distress is unlikely but there is still a restriction on free cash flow.
Read Anne-Marie’s comments in Pensions Expert
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