Industrial threads manufacturer Coats Group PLC (LON:COA) got a boost today after it revealed that it has sewn up a deal on two deficit-heavy pensions scheme which will allow it to pay dividends in the future.
The group said it has agreed with the trustees of the UK Coats Pensions Plan and Brunel Holdings Pension Scheme to provide financial support for a combined deficit which stood at £485mln as at April 1, 2015.
Coats said it has agreed to make upfront payments totalling £255.5ln paid directly into the two defined benefit schemes, which cover about 24,000 members, to be followed by annual contributions totalling £14.5mln, to be paid until 2028.
The schemes also will have access to sponsor support from Coats for future funding needs, with a company guarantee.
The group said it has received assurances from the UK Pensions Regulator that regulatory action being taken over the two schemes will be ceased.
Coats said that once the settlement is completed and regulatory action has ceased, it will lift its restrictions on distributions to shareholders.
In reaction, Coats shares were up 13%, or 6p at 52p in early afternoon trading.
Do the right thing ...
Mike Clasper, Coats’ chairman, said: "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.”
Coats said the two schemes combined represent approximately 90% of its UK pension liabilities and scheme members, but noted that similar terms have not yet been accepted by its Staveley Pension Scheme.
Proposals on comparable terms remain open to the Stavely scheme trustees, Coats said.
Coats - which has its roots in the textile industry boom of the late 1700's - returned to the stock market in 2015, 125 years after first listing on the London Stock Exchange.