UK – The two pension funds for coal and mining workers in the UK have invested £30m (€37.2m) in UK Coal in exchange for a 75.1% share in a new property company as part of efforts to reduce the burden of its £430m pension deficit.
The restructuring process, which started on 14 March, will see the company’s operation split into two distinct businesses.
The new businesses will comprise the mining division – called UK Coal Mine Holdings – and the property division – called Harworth Estates Property Group.
The mining business will continue as employer sponsor of the two pension schemes, the Industry-Wide Mineworkers’ Pension Scheme (IWMPS) and the Industry-Wide Coal Staff Superannuation Scheme (IWCSSS).
In return for giving up any potential claim against the property business, the two pension funds will receive a 75.1% share in Harworth.
Additionally, the pension funds have injected £30m of capital into Harworth to ensure it has the necessary funds to develop properties and thereby achieve the maximum value for the schemes in the long term, UK Coal said.
Donald Duval, partner at Aon Hewitt, which advised UK Coal on the restructuring, said: “The split of the business, with the pension schemes taking the majority share in the property business, is an innovative solution to the problem of funding the pension schemes while allowing the companies to invest in the business.”
Under the agreement, the mining division will now be run by a new Employee Benefit Trust, which holds shares representing 67% of the voting and 10% of the economic rights, while UK Coal will retain 90% of the economic and 33% of the voting rights.
Jonson Cox, chairman at UK Coal, said the restructuring had helped to safeguard 2,500 “highly skilled and well-paid jobs” and created a funding plan for UK Coal’s £450m pension deficit.
“Without this restructuring, the costs would have fallen by now to the British taxpayer and the Pension Protection Fund,” he said.
Cox added that all cash surpluses from the mines would go to fund the pension deficit for the foreseeable future.
“On the property front”, he added, “our successful sales programme of the last two years has enabled us to halve the group’s bank debt, in turn allowing this restructuring to proceed.”
Following the restructuring, Keith Heller has stepped down from the board of directors at UK Coal and will now be a trustee of the Employee Benefit Trust.
UK Coal will be renamed Coalfield Resources later today.