The Coats UK Pension Scheme has completed a £1.3bn buy-in with Pension Insurance Corporation, covering the remaining 80% of the scheme’s liabilities.

The transaction secured the pension benefits for 18,042 scheme members, building on a previous buy-in by the scheme in December 2022, which covered 20% of the scheme liabilities.

This buy-in was highlighted as the “final and most significant step” in Coats’ fully insuring its UK pension obligations, with all of the financial and demographic risks relating to the scheme's liabilities now fully hedged.

The agreement with PIC is expected to require up to £100m of additional funding from the group, with Coats making a £70m upfront cash contribution to the scheme and a further £30m provided initially as a loan to the scheme.

LCP acted as lead consultants on the deal, while PIC received legal advice from Herbert Smith Freehills.

The trustees, meanwhile, received actuarial advice from LCP, legal advice from Sackers and investment advice from Redington, and the company was advised by Isio and Baker McKenzie.

Coats Group chief financial officer, Jackie Callaway, commented: “This brings us close to the end of a lengthy journey of funding our UK pensions.

“From having $3bn of liabilities across three schemes in 2016 with a technical provisions deficit of c.$750m, we are now securing fully insured benefits for our pensioners and removing volatility and uncertainty for our investors.

“Now that the scheme is fully funded and cash contributions have ceased this will lock in a significant improvement in the group's free cash generation.

“The completion of the buy-in reflects the constructive and collaborative working relationship between the group and the trustee and I would like to thank everyone involved for helping us get to this position, which will benefit all stakeholders.”

PIC head of origination structuring, Matt Richards, added: “One notable feature of this transaction was the active support from Coats as sponsor, reflecting their experience of positive sentiment achieved by aligning shareholder and scheme member interests.”

---