UK - Trustees of the EMI group pension scheme have approached The Pension Regulator (TPR) for help in agreeing a funding arrangement with EMI and its private equity owners, Terra Firma.

In a letter to scheme members, published on the internet, the EMI Group Pension Trustees revealed a previous agreement between the parties, which should have granted "a meaningful amount of watertight security", was found to not be "sufficiently robust".

Terra Firma purchased EMI, the world's third-largest music corporation, for £2.4bn (€3.1bn) in May 2007, however in October TPR was forced to mediate between the parties to broker a funding agreement for the scheme, which is valued at £959m according to the Pensionfundsonline website. (See earlier IPE story: Regulator steps in to mediate at EMI pension fund)

It is understood EMI has calculated the deficit at less than £50m, and currently pays in £10m in annual contributions, however as the trustees take a different view and EMI is not prepared to put forward an alternative funding plan, trustees have told members "with regret" it had decided to inform TPR "there is no reasonable prospect of reaching agreement with EMI and Terra Firma on funding".

The basis of the dispute means the first issue is to discover if there is a deficit in the scheme, so if there is a gap and the parties still cannot agree on a funding arrangement the regulator could step in and use its powers to impose a funding level and the contributions which would have to be made.

In the recent letter to members, trustees confirmed in mid-December 2007 they had reached an agreement "in principle" with EMI and Terra Firma which would provide funding security for the scheme.

The idea was the funding agreement would provide the pension scheme with the same level of security was granted to Citi, the bank which loaned Terra Firma the money for the acquisition.

However, trustees have now informed members "detailed discussions" have since revealed the security package offered to the pension scheme did not rank equally with the bank's in "certain important respects".

A spokeswoman for TPR confirmed the matter had been passed on to them and they were looking into it, but said the regulator could not comment on ongoing individual cases.

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