Hammonds and City boutique Sackers have secured a top-quality mandate to advise on a landmark decision that has seen the Pensions Regulator exercise some of its powers for the first time.
Pensions partners from Hammonds (Simon Price) and Sackers (Nick Couldrey) have been drafted in to advise the trustees of Sea Containers on the closely-watched payment order demanding a cash injection into the company’s £90m deficit in its final salary scheme.
It is the first time the regulator has issued a Financial Support Direction (FSD), which forces the parent company to pay into the service company’s pensions liabilities. The FSD was a power given to the regulator two years ago under the Pensions Bill.
Linklaters pensions partner Mark Blyth commented: “Most people are surprised that it has taken the regulator so long to show its teeth. The regulator has always been taken very seriously by companies and trustees, but it will be taken even more seriously now.”
Sea Containers has two pensions schemes for its UK staff. Sackers is advising the trustees in relation to the larger 1983 fund, while Hammonds has been instructed on the 1990 fund.
The FSD will come into force next month if Bermuda-based Sea Containers do not appeal the decision. The body will publish its reasons for choosing to start the FSD process on Monday (25 June).
Hammonds and Sackers already have highly-rated pensions departments but this move, which will test the extent of the watchdog’s powers, has boosted the profile of pensions lawyers across the City. Pensions lawyers have also been enjoying an increasingly important role on transactional work in recent years.
Hammonds London pensions head Jay Doraisamy explained much of the interest is due to the rise of private equity investment, especially in deals that have large amounts of debt and high gearing.
She said: “While some people do not appreciate the importance of trustees, they soon will. I am now seeing some indications that the regulator is now proactively approaching companies rather than being approached by their trustees.”
Kirkland & Ellis is advising Sea Containers on the €1.3bn (£885m) restructuring, with London-based restructuring partner Richard East and Chicago-based restructuring partner David Eaton leading the team.