Trustees and employers are exploring more dynamic funding solutions and are increasingly looking towards contingent assets such as guarantees, escrow arrangements and, at the more complex end of the spectrum, asset-backed funding structures to provide additional security and covenant support.
Contingent assets are commonly used to provide covenant support in the context of both scheme funding discussions and where a corporate event, such as a takeover, sale or corporate restructuring, impacts the employer covenant. These events may be employer-driven or occur as a result of changes in legislation, such as the banking reform legislation.
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