Corporate events for Covenant services

Restructuring and special situations

What are corporate events?

From high-profile mergers, acquisitions and restructuring to internal re-organisations and non-core disposals, corporate events and transactions cover a wide range of situations.

These can be fast-paced situations and often extremely complex. For trustees and the sponsor, clearly understanding the impact an event could have on the risk dynamics faced by a scheme remains critical. To do this, trustees need to be closely involved and consider the key areas of a corporate event in order to determine its impact on the scheme, employer covenant and different stakeholders. In an ideal world the pension scheme will be involved in conversations from the outset given, in our experience, proactive engagement from trustees is critical to help the outcome for the scheme and its members.

Certain high-profile transactions may see pension trustees being thrust into the public spotlight and becoming subject to in-depth scrutiny from The Pensions Regulator.

The challenges of corporate transactions

Corporate transactions can have a significant impact on employer covenant, future scheme funding plans and risks faced by a scheme. As such, a transaction may not only drive a need to mitigate detriment to covenant, but it can also provide a platform to address a changing risk profile faced by a scheme over its life. This is particularly important today given the potential risk of complacency in light of improved scheme funding.

With the Pensions Schemes Act 2021, trustees need to demonstrate how they have evaluated the covenant impact of any corporate activity for an outcome that benefits all stakeholders and meets regulatory obligations.

The challenges of corporate transactions

Key areas to consider

Strategic benefits

Strategic benefits of the transaction, together with the risk it introduces
Impact on a sponsor’s capital structure

The impact on a sponsor’s capital structure (including increased debt and use of proceeds)
Value leakage

Value leakage either as part of the deal or post deal
Impacts on trustee powers

The potential triggering of a section 75 debt and / or impacts on trustee powers

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What you need

A deeply experienced advisor that can get up to speed quickly and provide trustees with responsive, expert guidance to secure great outcomes for pension scheme members and helps find a solution that works for all stakeholders.

What you need

We work with you to:

1

Provide independent advice by covenant experts during fast-paced, complex corporate transactions – including mergers and acquisitions, disposals and restructurings.
2

Assess the key challenges faced by your pension scheme as a result of these transactions.
3

Evaluate the likely impact of corporate transactions on your pension scheme and its journey plan.
4

Advise you on innovative solutions beyond one-time mitigation to mitigate any adverse impact and update / protect the journey plan of the scheme in the context of changes to covenant risk dynamics, such as contingent assets, enhanced downside protections and information sharing protocols.

With Cardano’s breadth of skills and depth of experience leading trustees through corporate transactions and restructurings for the best part of 20 years, our client teams are able to seamlessly hit the ground running in any situation. We are also able to supplement our core teams with relevant subject matter specialists from across our experienced team (e.g. Takeover Code, solvent stressed restructuring scenarios) as needed to ensure trustees receive the advice they need quickly.

Our appreciation of capital agendas means we often find the key leverage to put trustees into a strong negotiating position, while focusing on thoughtful stakeholder management to unlock deals and help achieve a win-win outcome for all stakeholders. We also have deep insight into The Pension Regulator, which helps us to ensure trustees take a position and agree a deal that meets The Pension Regulator’s expectations (and addresses the contribution notice and material detriment tests).

In addition, given we are primarily a pensions-focused business unlike some of our competitors, we can provide truly independent advice with your interests at the core of our approach.