Tata Steel UK signs agreement to clear pensions liabilities

Tata Steel has sealed a major pensions deal   Tata Steel's distribution and service centre at Wednesfield

Tata Steel has sealed a major pensions deal Tata Steel's distribution and service centre at Wednesfield

The deal clears the decks for Tata Steel to expand its operation and proceed ahead its joint venture with ThyssenKrupp, which was facing hurdle from the British Steel Pension Scheme (BSPS).

Tata Steel UK (TSUK) has confirmed it had signed documentation for a pact with the Trustees of the £15 billion British Steel Pension Scheme, which will allow the steelmaker's pension scheme to be separated from the business, reducing the risks to the company.

The regulator said the restructuring proposals would help shield the firm from insolvency and deliver greater security for around 130,000 members of the British Steel Pension Scheme, which has now closed.

The development follows the company's announcement on May 16 that the key commercial terms of an RAA had been agreed in principle between the company and pension scheme trustee.

At the end of that period, and in the absence of any referrals, it is expected that the regulator will confirm its approval of the RAA, which would take effect after the steel maker makes a payment of 550 million pounds to the British Steel Pension Scheme. After the accord was signed, the pension regulator issued a clearance statement that marks the commencement of a 28-day period during which parties directly affected by the RAA may refer the decision to approve it before the Upper Tribunal of the United Kingdom court system.

"The regulator is willing to work closely and constructively with employers who face real challenges in meeting their pension obligations due to hard trading conditions.This proposal brings greater certainty for pension scheme members and unlocks the possibility of restructuring the company, which in turn could lead to preserving jobs".

Slaughter and May advised long-standing client Tata Steel on the restructuring, with pensions and employment partners Charles Cameron and Phil Linnard, restructuring partner Ian Johnson, finance partner Andrew McClean and M&A partner Padraig Cronin comprising the team.

The restructure of Tata steel pensions liabilities will no doubt signal the start of the proposed merger with Germany's Thyssenkrupp who would see the move as "de risking" Tata's pension.

At the same time the British Steel Pension Scheme Trustee will get a one third stake in the steel business.

Indian-owned Tata announced plans a year ago to sell its United Kingdom operations, including the Port Talbot steelworks in Wales.

Lesley Titcomb, chief executive of the regulator, said: "We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very hard situation".

Choosing to transfer to the successor scheme will give some members the potential to receive higher benefits than if they stayed in the BSPS on its entry to the PPF.

The UK arm of the company also said it has reached a pact for the sponsorship of a proposed new pension scheme which would be conditional on certain qualifying norms.

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