Pension fund takes share of Jessops in debt swap deal
UK - Jessops, the chain of UK photographic stores, has been saved from administration by a deal which will see trustees of its defined benefit pension plan as well as an unnamed employee benefits trust take the majority stake in the company.
A statement issued by the firm said HSBC, to whom the bulk of the debt was owed, will take a 47% in a new special purpose vehicle called Snap Equity Limited, in return for writing off £34m (€37.2m) in debt owed by Jessops plc.
At the same time, the Jessop Group Limited Pension & Life Assurance Scheme (1993) has taken a 33% stake in the new firm while "an Employee Benefit Trust" - thought to contain the Jessop Group Limited Money Purchase Pension Scheme - will also take a 20% share of the company.
This is the first such deal to hit the market of this magnitude, as the deal is effectively a form of contingent asset agreement, similar to those signed by supermarket-related pension funds who in recent months have accepted sale-and-leaseback property arrangements from sponsors instead of cash top-ups.
This latest move relates to a debt arrangement signed in August 2007 between HSBC Bank and the DB plan, to give Jessop the necessary financial backing it needed to secure the HSBC loan and provide the pension fund with contingent assets.
Jessops' annual report at the time said a new debt facility for £66.5m had been made available to the company until 31 December 2008, and were secured to HSBC and the DB pension fund by fixed and floating rates charges over the assets of Jessops Group Limited and over the shares of Camera Equity Limited.
Indications at the time were the trustees had accepted the contingent assets debt agreement subject to clearance by The Pensions Regulator. Officials at TPR were unable to either confirm or deny at the time of publication whether clearance had ever been given to this arrangement.
The Jessops final salary pension plan has been closed to new members since 1997 and has amassed a deficit over the years. In that same interim annual report to 31 March 2008, the DB pension deficit under IAS19 accounting stood at £7.9m.
The company was at that time paying contributions of £130,000 a month. The money purchase plan - managed by Norwich Union (now Aviva) - was receiving contributions of between 1% and 6% of salary, depending on the employee's age and length of service.
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