Over the past year, the Indian company has sold off some of its unprofitable assets in the United Kingdom as it sought to cut losses amid an industry slowdown and glut in supply.
Slaughters advised Tata Steel on the restructuring with a team led by pensions and employment partners Charles Cameron and Phil Linnard, head of the firm's financing practice Andrew McClean, M&A partner Padraig Cronin and head of restructuring and insolvency Ian Johnson. Thyssenkrupp had identified the pension liabilities as a major stumbling block to any possible deal and is said to have a plan B in place as talks drag on.
It was noted at that time that the RAA remained subject to the agreement of detailed documentation with the pension scheme Trustee, as well as formal approval by the UK Pensions Regulator and non-objection from the UK Pension Protection Fund.
However, under the proposal, the steel maker said it would spin off its pension scheme into a separate entity, with the £15bn British Steel Pension Scheme (BSPS) to be closed to future accrual and be replaced with a defined contribution scheme.
The net financial impact of the deal would be reflected in Tata Steel's second-quarter financial results, he said.
Thyssenkrupp shares briefly erased losses on Friday, rising as much as 0.8 per cent after the announcement, before trading lower again.More news: Axalta Coating Systems Ltd. (AXTA)
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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.
A spokesperson for the PPF said: "Members of the British Steel Pension scheme will have seen a lot of speculation about the future of their pensions, so we want to reassure them the PPF is there to protect them throughout this process".
Workers will now have a choice of joining the new scheme or come under the PPF, a lifeboat for when pension funds become insolvent. "In order to continue to trade, TSUK required ongoing funding from the Tata Steel Group, which it was not willing to provide until funding challenges for the existing scheme were resolved". "Our members have been extremely disappointed at the lack of communication in recent months and this has to change immediately".
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 RAA process has been a long and detailed one, and I would like to thank the Pensions Regulator, Pension Protection Fund, the Trustee of the British Steel Pension Scheme, its members, the unions and employees - indeed, all our stakeholders, including the Governments of the United Kingdom and Wales, for their constructive engagement through the process".
"The company and the trustees must remember they are dealing with people's long term future, their life savings, and their family's financial security; it is vital members are given all the support that they need".