Corporate restructurings: New kids on the chopping block
The process of restructuring struggling enterprises in this downturn will be different not only because of the nature and number of stakeholders in each deal, but also because new players are present at the restructuring table.
In the UK, pension trustees now have a seat at the table and they have security. The Pension Protection Fund (PPF) was established in 2004 to provide compensation to members of eligible defined-benefit pension schemes when the employer is insolvent and there are insufficient assets in the pension scheme to cover the PPF level of compensation. Eligible corporates are charged a levy to cover the cost of compensation. Recent figures released by the PPF show that the 7,800 schemes now insured by the fund have an asset shortfall of £155 billion ($237.7 billion). This has raised concern among restructuring professionals that the levy charged by the scheme will have to rise. "The size of the levy charged by the PPF is dependent on the perceived risk of the company," says Andrew Speirs at Hawkpoint. "If the number of companies going bust increases massively then the fund could increase this levy – something that would suck value out of corporate equity and into the pension fund." The PPF itself is adamant that the levy will not be increased – at least not yet. "The PPF levy is capped at £800 million," the PPF tells Euromoney.