Diageo serves up millions of barrels of Scotch whisky to plug pension deficit
Friday 02 July 2010
The drinks giant Diageo is to use millions of barrels of its maturing whisky as collateral to help plug its £862m pension deficit. Under an agreement with its UK pension trustee, Diageo said yesterday it will transfer its maturing whisky stock – which has a book value of £500m – into a new pension funding partnership (PFP).
The transfer of the spirit – a mixture of grain and malt maturing whisky from Diageo distilleries such as Talisker, Lagavulin and Caol Ila – means the pension fund's deficit will be immediately reduced as the assets can be set against its liabilities.
Under the deal, Diageo will pay £25m a year into the pension fund in the form of fees for options to acquire the whisky stock at any point. The transfer of the stock, which will be less than three years old, will involve between 2 million and 2.5 million barrels at any one time. When combined with its current payments into the fund, Diageo will continue to pay about £50m a year, which is about the same amount as it has since 2007. This annual payment will be broadly cashflow neutral and the deal will not affect Diageo's net assets.
At the end of the PFP's 15 years, the trustees will be able to sell the whisky back to Diageo at either a price that matches the pension deficit at that time or for no more than £430m, depending on which option is lower.
Gaping pension deficits are a major burden for many UK firms, and companies such as Marks & Spencer and Sainsbury's have already used property assets in a similar way to help guarantee their pension schemes. When Diageo's triennial valuation was carried out last April, its pension fund had a deficit of £862m, which triggered a requirement to put in place yesterday's 10-year funding plan. Diageo said that its funding position had improved "significantly" since then. The scheme was closed to new members in 2005, in favour of a defined contribution plan.
In other parts of the new agreement, Diageo said that £197m had been transferred into the UK scheme, under the terms of its 2006 funding plan. Diageo has also set aside £338m to transfer into the scheme, if an equivalent reduction is not achieved over 10 years.
- 1 The man who filmed the Freddie Gray video has been arrested at gunpoint
- 3 Top Gear: Jodie Kidd, Philip Glenister and Guy Martin 'in advanced talks' to join show
- 4 Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
- 5 How to gain confidence and maximise your sexual potential
Boston Marathon runner's search for mystery man she kissed ends with letter from his wife
Frankie Boyle on Scottish independence: 'In the Interests of Unity, F**k Off'
Italian police 'reveal' what Jesus looked like as a young boy
Mysterious 'X-Files' sounds heard miles above the Earth
Met Gala 2015: Beyoncé manages to out-skimp Rihanna, Miley and Kim Kardashian combined with near-naked ensemble
In defence of liberal democracy
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
Andy McSmith's Sketch: Feisty audience is the real star of an enlightening show
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...