Coats Group (LON:COA) has agreed terms (subject to final settlement) for two UK defined benefit (DB) pension schemes, representing 90% of UK DB scheme liabilities. This clarifies the underlying balance sheet position and ongoing cash profile. Coats retains a strong financial position, with good earnings growth prospects and a likely return to the dividend list from FY17.
Two UK DB pension schemes agree terms
Coats had a group net cash position of US$59m at the end of June (including US$396m parent-company cash). We had factored in c US$29m annual recovery payments into the Coats UK and Brunel DB pension schemes (plus a further c US$6m into the Staveley one). Agreement on future funding has now been reached with the trustees of these two schemes and, importantly, their UK Pensions Regulator’s warning notices are likely to fall away. Subject to final settlement early in FY17 and adjusting for FY16 Brunel contributions, Coats expects to make a one-off U$314m cash payment into the two schemes, with US$18m pa recovery payments from FY17. These schemes now have the same covenant and liability guarantee. There are inferred terms for the Staveley scheme (c US$53m one-off payment, c US$4m pa recovery payments) although negotiations are ongoing.
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