UK - Interserve, a UK services, maintenance and building group, has transferred its stake in a portfolio of 13 Private Finance Initiatives (PFI) to its £400m (€441m) pension scheme to help reduce its funding deficit.
In what is believed to be the first contingent asset transaction to use PFI investments - previously other firms have transferred shares or property assets to their pension schemes - Interserve claimed the move would reduce the deficit by a quarter.
The firm currently has interests in 34 PFI projects so the transfer represents more than a third of its overall portfolio and includes investments in sectors such as healthcare, defence and education.
It confirmed the 13 projects have an agreed valuation of £61.5m, which will reduce the estimated scheme deficit of £250m - as of the end of 2008 - to around £190m. The firm is currently in the process of finalising its triennial actuarial review and a spokesman explained the deal is also expected to reduce the level of future cash contributions Interserve would need to pay into the scheme to cover the shortfall.
Under the terms of the arrangement Interserve will continue to manage the PFI investments and will maintain the arrangements for the delivery of facility services, however "all future interest and dividend income" over the lifetime of the investments will be payable to the pension scheme. With Interserve noting the profits attributable to these assets reached £1.7m in the first half of 2009.
The firm also highlighted the benefits for the pension fund, which include "long-term predictable cash flows" as the PFI projects can last for 25-30 years with an "almost guaranteed" income from the government, and a sensitivity to inflation that matches the scheme liabilities. In addition it suggested the arrangement also diversifies risk for the pension fund as they will have an independent income to help reduce the deficit rather than relying solely on the sponsor.
Tim Jones, group finance director of Interserve, said: "This agreement is very good news for all stakeholders, providing a significant contribution towards the current pension scheme funding shortfall whilst crystallising value from our PFI portfolio."
The 13 PFI projects transferred to the pension scheme are: Dudley NHS Trust; St Genevieve's School; Southampton Schools; Hattersley (Tameside) Schools; Tyrone - Omagh College; Tyrone - Dungannon College; Cornwall Schools; Telford & Wrekin Schools; Defence Sixth Form College; Armada - Devonport Fleet Accommodation Centre; Cornwall Fire Stations; Portsmouth Social Services; Health & Safety Laboratories at Buxton.
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