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Whitbread sets out recovery plan for £388m deficit

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UK - Whitbread, the UK hospitality firm, has confirmed it is giving its pension fund £150m of its property assets as contingent assets after the latest valuation revealed a pension deficit of £388m (€435.2m) on an actuarial basis.

Figures from its preliminary results for 2008/09 showed despite a deficit reduction contribution of £50m in 2008/09 - in line with a recovery plan agreed with trustees in 2003 - the funding gap in the defined benefit (DB) scheme has widened over the year.

Whitbread confirmed the shortfall had increased significantly on an IAS19 basis from £33m in February 2008 to £233m a year later, although the results of the triennial actuarial valuation of the fund showed at 31 March 2008 the scheme had a deficit of £388m.

The firm, which owns companies such as Costa Coffee and Premier Inn, pointed out the actuarial calculations use "more conservative" assumptions than the IAS19 basis so a higher deficit is produced.

The final figures follow on from the quadrupling of the deficit in the first six months of the financial year, when the interim results, announced in October, showed the IAS19 deficit had reached £153m as a result of inflation and the fall in asset values.

In the results statement, Whitbread outlined a recovery plan agreed with trustees that will see it make additional contributions to the closed scheme until 2018, subject to the "appropriate consents, due diligence and final documentation".

Under its previous recovery plan, set in 2003 and updated in 2005, Whitbread had been expected to pay deficit reduction contributions of around £20m in each of the financial years 2009/10 and 2010/11, however in the new payment plan no further contributions will be made until August 2011.

From this date, Whitbread has pledged to contribute £55m each year until 2013, followed by £65m in 2014 and 2015, £70m in 2016 and then two final payments of £80m in 2017 and 2018.

The company also revealed it had "agreed to grant security over £150m of its property assets in favour of Whitbread Pension Trustees Limited and to update and renew the financial covenant which has been in place since 2003."

The decision by the company to give the pension fund, valued at £1.37bn in February 2008, access to some of its property follows a similar move by Tesco earlier this month when it confirmed £500m of real estate assets had been pledged as contingent assets to the scheme. (See earlier IPE article: Tesco fund gets £500m property as deficit exceeds £1bn)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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