C&W pension fund could need 100m
CABLE & Wireless may be forced to agree an additional £100m payment into its pension fund before it can go ahead with the planned de-merger of its business units.
The firm said on Tuesday it had revived plans to split its Worldwide unit, which supplies companies in Europe, Asia and the US, from its international division, which provides fixed-line, mobile and broadband services in the Caribbean, Macau, Panama and Monaco.
The demerger is scheduled to complete by March 2010, but this is dependent on the outcome of talks with the trustees about splitting the pension fund’s assets and liabilities down the middle, with half going to each of the new businesses.
With it’s IAS 19 pension deficit standing at £305m at the end of September, some analysts were concerned that a failure to satisfy the trustees could lead to the demerger hitting the rocks.
Earlier this month, C&W said it had agreed to make a top-up payment of £75m over a period of three years, which started with a £10m payment in October 2009.
But C&W finance director Tim Pennington said this week: “I suspect we may have to put in a little bit more”. Analysts did not seem concerned that the trustees could force C&W to pay a large lump to cover the £305m deficit, but speculated about how much they would insist on.
“Far more likely is an agreement for C&W to top up the scheme over a five to ten year period, suggesting it will need to make additional contributions in the £50m to £100m range,” said Execution analyst Will Draper.
Charles Stanley analyst Tom Gidley-Kitchin was also upbeat, noting that C&W emphasised that the trustees were “quite relaxed” about the position of the fund.