De La Rue scheme invests in SLP
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The De La Rue Pension Scheme has invested in a Scottish Limited Partnership, which can lend and is backed by a letter of credit from a bank. The funding and covenant protections negotiated with the sponsor as part of De La Rue’s recent acquisition means the scheme is now fully funded.
De La Rue, the British banknote maker which famously lost a contract to print the UK’s post-Brexit passports to a European company in 2018, was recently bought by private equity firm Atlas Holdings.
As part of the takeover, Pan Trustees, which is the sole trustee, negotiated a package of funding and covenant protections which are now in place and mean the scheme “is now broadly fully funded” on a technical provisions basis.
The scheme has now also invested in an SLP. This gives the scheme a fixed 10% annual interest rate on loans the SLP makes to the company, along with repayment of the principal after five years. A bank‑issued Letter of Credit covers all of the repayment obligations in respect of the loans, with the trustee calling this “a key feature of the investment” as it provides extra security.
“Effectively the investment is underwritten by a bank with a higher grade credit rating than the company,” the trustee said. It also has a higher grade than the trustee would expect to receive from a similar corporate debt investment, it added.
A spokesperson for De La Rue said: “De La Rue works constructively with the pension scheme trustee and has appropriate funding, investment and security arrangements in place. These arrangements were discussed in detail between De La Rue and the trustee at the time of the Atlas acquisition and support the long-term security of members’ benefits, and are consistent with established market practice. De La Rue and the trustee keep these arrangements under review on a regular basis in accordance with regulatory requirements and the principles of good governance for large occupational pension schemes.”
SLPs are not uncommon among pension funds as a way to hold contingent assets, for example where sponsors want to avoid creating trapped surplus. They came under fire over money laundering and asset concealment in recent years, which has led to the Economic Crime and Transparency Act 2023.
