(April 18, 2013) — Cheese and milk producer Dairy Crest has boosted its pension fund’s coffers with a one-off £40 million payment, alongside a rather cheesy contingent asset.
In addition to the cash contribution, Dairy Crest Group Pension will also receive a floating charge – or contingent asset – over maturing cheese inventories, with a maximum realisable value of £60 million.
Dairy Crest manufactures three cheddar brands in the UK: Cathedral City and Davidstow, as well as the Cheds brand, marketed at children.
The unusual measure is the latest in a long line of adaptations the company has introduced to lessen the liability of the defined benefit scheme, including a £300 million bulk annuity purchase for pensions in payment, closure of the scheme to future accrual, and an enhanced transfer value exercise.
Other interesting contingent assets used by pension funds have included planes that were handed over by British Airways as security to its DB fund, television company ITV offering intellectual property rights of its digital arm, and grocery giant Tesco employing its superstore properties as a deficit reduction tool.
Dairy Crest also has an on-going annual deficit contribution payment of £20 million, which is paid in monthly instalments.
Inventories of maturing cheese as of 31 March 2013 are estimated to be valued at £150 million. It is not clear whether crackers are to be included in the deal.