A ground-breaking scheme of arrangement has been approved by the High Court. The innovative restructuring of the pension liabilities of Uniq plc allowed the company to dispose of its defined benefit pension liabilities in the first pension debt-for-equity swap of a listed company in the UK.

The restructuring took place by means of a scheme of arrangement and a regulated apportionment arrangement, under which pension liabilities in excess of £480 million were transferred to a special purpose vehicle (SPV). The SPV was incorporated and managed by Capita, with the SPV holding over 90 per cent of Uniq's share capital on charitable trusts for the benefit of the pension fund. The transaction involved negotiation with all stakeholders including the trustees, the Pensions Regulator and the Pension Protection Fund.

Although the scheme of arrangement diluted the existing shareholders' equity to 9.8 per cent, the Court accepted that the restructuring represented the only viable means for the company to avoid insolvency and that it did not offend the statutory prohibition on financial assistance.

Uniq plc subsequently had its shares admitted to the Alternative Investment Market, and the SPV also plans to trade its shareholding.

While other employers may wish to consider a similar arrangement to manage their defined pension scheme liabilities, Uniq was able to gain approval for this restructuring since the Court accepted that it represented the only viable way of avoiding insolvency, taking into account the relative sizes of the pension deficit and the company's business. In addition, the transaction did not compromise the scheme's eligibility for admission to the Pension Protection Fund.