Covenant Advisory. Meet the team. Winter 2018

Transcription

1 Covenant Advisory Meet the team Winter 2018

2 Why EY Our national award winning and friendly team is experienced in advising in all matters relating to covenant with the ability to draw on the strengths of a global firm for sector insights. This short document provides an overview of our team, the services we offer and our methodology. At the back of the document we provide brief CVs of our core team. Highly experienced team Our team has considerable experience in the industry, advising on a wide range of situations. Whilst we advise on some of the most 1complex, high profile cases we also advise a broad range of schemes and corporates of all sizes. Deep sector expertise 2We have significant experience of working across a number of key sectors with the ability to pull sector expertise globally from within EY. 3 Collaborative and proportionate We work extensively with trustees, corporates, lawyers, actuaries, investment advisors and the Pensions Regulator, enabling us to understand the perspectives of all key stakeholders and to bring a collaborative and proportionate approach that helps achieve optimal outcomes while appropriately managing costs. Trustee-centric EY Proven covenant methodologies We have proven methodologies for covenant assessment, corporate transactions, monitoring and scenario planning which will deliver a robust view of covenant and risk to 4support an integrated approach to your funding strategy. Desired outcome Company Scheme Advisors Collaborative process Clear and concise reporting Our reporting is tailored to each situation to make sure that it is clear, concise and focused 5on key issues. This improves efficiency in both decision-making and helps manage costs. 1

3 Who we are A highly experienced, multi disciplinary team operating throughout the UK. We love what we do and our clients tell us we provide them with great advice. Core team Scotland Jamie MacKenzie Sarah Paul Karen Kirkpatrick Leeds Manchester Trevor Oates Mike Holford Birmingham Paul Taylor Rachel McCarthy London Taylor Dewar Chris Steven Sacha Kilner Covenant specialists for Karina Brookes James Berkley Heather Walker Jo Nicholson Kathryn Todd 2

4 Client Testimonials Jamie explained complex areas clearly and concisely, was readily available and constructively added real value once we engaged in negotiations with the employer. Chair of Trustee Board, International Manufacturer James is very strong, is good at listening to what we re describing and providing advice that is relevant. His advice is measured, to the point and he s got a nice thoughtful reflective style. FD, household name EY has an encyclopaedic knowledge of the UK Pension landscape. Vice President, retailer The trustees breathed a collective sigh of relief that they were in good hands. Heather, you came across well & knowledgeable. Chair of Trustees, listed IT services provider Taylor really impressive and very highly regarded. His approach and style is positioned well and both listens as well as listened to. Helping to drive progress rather than tension. Trustee, consumer goods Mr Dewar is a highly experienced employer covenant specialist whose evidence was careful and measured. I found him to be an impressive and entirely reliable witness. The Court, MNRPF judgement We can rightly be pleased with the package we negotiated and could not have got anywhere near it without Karina s help, support and resilience. I for one slept a lot better last night. Trustee, listed retailer The team gave clear and transparent advice which helped articulate the trustees concerns to the overseas employer and paved the way to a sensible and consensual solution. Trustees, international retailer Thank you very much for the final report and more importantly all of your guidance, support and advice throughout the process which has been much appreciated by all of the Trustees. Chair of Trustees, Foreign parent 3

5 Our wider firm: deep sector expertise On the majority of our assignments we use the wider EY firm to provide both sector expertise and technical support, enabling us to quickly and efficiently identify the big issues and focus our work in those areas. Management like working with us because we understand their business and that reflects well on the trustees in turn, leading to a stronger trustee and corporate relationship. EY s knowledge of the covenant and the Sponsor s industry were critical in formulating a defence. Trustee, utilities provider 4

6 Technology Media & Entertainment Telecommunications (TMT) Wealth & Asset Management Automotive and Transportation Consumer Products & Retail Globally, EY has 15 principal sectors and the covenant team has worked with them all Private Equity Valuations Oil & Gas Supplementary covenant service offerings Investment Accounting Government & Public Sector Legal Tax Life Sciences Actuarial Our wider firm Shadow credit ratings Insurance Health Assurance Contingency planning Entity Priority Modelling Mining & Metals Financial Services Power & Utilities Banking & Capital Markets Real Estate Hospitality & Construction 5

7 Our services A collaborative and proportionate approach to help solve your issues. Covenant review and advisory Monitoring and IRM Technical support Major events Expert witness Ongoing Event driven Covenant review and advisory Monitoring and IRM Technical support Our offering Support triennial valuation by providing view on strength of covenant Covenant advisory, assessing business performance and affordability in the context of the current recovery plan Ongoing assessment of clients; more emphasis where client is stressed/distressed Access to sector specific briefings and thought leadership from our industry experts Continued analysis of options available to the pension scheme/corporate PPF certification Advising on regulatory changes Trustee training Advise in relation to CPI vs. RPI Living will Scheme mergers Flexible apportionment Arrangements Valuations and credit ratings Contingent assets Closure to accrual Benefit Robust, independent assessment of covenant strength Understanding ongoing covenant strength in line with TPR best practice Ensures compliance and advice based on technical expertise EY approach A flexible approach that is collaborative and proportionate to scheme size Monitoring is bespoke to client s individual needs in terms of drivers and monitoring frequency IRM provides confidence that the scheme funding target, recovery plan and investment risk remain appropriate given the covenant strength We have aligned our reports and covenant scale to fit in with the Regulator s guidance Observations from the team Like many of our competitors we advise both trustees and corporates during triennial valuations, the difference is our approach is collaborative and proportionate providing bespoke advice to our clients. We provide regular monitoring reports to over a third of our clients, flexing our report to fit with client needs, for example, I provide quarterly update reports to one of my clients, but annual for another, taking into consideration the strength of covenant. We assist clients in certifying their PPF guarantees covering parental guarantees and more complex asset backed structures involving multiple schemes. For one of my clients our work also included the valuation of their asset backed structure. Rachel McCarthy Trevor Oates Heather Walker 6

8 Our services Covenant review and advisory Monitoring and IRM Technical support Major events Expert witness Ongoing Event driven Major events Expert witness Our offering Benefit EY approach Advice relating to pension scheme considerations when undergoing a transaction/corporate event Assessment and advice where a large pension deficit is impacting the going concern of the business A pragmatic and practical approach to give the best possible protection to members benefits. Creative solutions to help the sponsor achieve their objectives. A collaborative process that strengthens relationships where possible and avoids unnecessary conflict Our multi-disciplined team s depth of experience in this area is coupled with our understanding of each of the key stakeholders perspectives and overlaid with sector expertise Acting as an expert in a litigious situation regarding a pension scheme Experience of advising on complex and litigious matters With experience in a wide range of sectors and advising on numerous market leading situations, we are well placed to provide a second pair of eyes Observations from the team In each of the very many deals I have advised on since the creation of the Pensions Regulator, I have sought out win-win outcomes for the scheme and corporate alike. James Berkley Together with straight forward cash mitigation, reaching a consensual agreement has at times required asset backed funding, guarantees, changes to the proposed transaction structure, de-risking of the scheme or contingent funding agreements. Chris Steven I acted as an expert witness for the trustees in the High Court in respect of the MNRPF case. Taylor Dewar 7

9 Proven methodology Our employer covenant methodology has been designed and updated with TPR guidance in mind. In assessing the relative position of a scheme and concluding on overall covenant strength, we consider the following: Direct covenant Legal covenant Additional legal support Wider group What opportunities are available to improve any weaknesses within the legal covenant structure? Balance how much weight to place on each? What is the long-term view of covenant strength, including key risks? Ongoing Exit Financial covenant Strategy and market Profitability Affordability Financial flexibility Balance sheet How robust are the income streams and what are the key earnings dependencies? What are the competing demands on cash? What is the flexibility for dealing with a scheme or sponsor downside event? Initial covenant assessment Weak Tending to weak Tending to Strong Strong Does the asset base provide sufficient coverage for the scheme deficit and can this be supplemented with wider group support or security? 8

10 Training and thought leadership We deliver trustee training to our clients, provide networking opportunities to link people together, and harness the insights of our sector experts for the benefit of all. Training We are experienced in delivering trustee training, relevant to client needs and speak at pension servicers across the UK. Thought Leadership We are able to harness thought leadership and sector expertise across the firm to provide insights on covenant issues and market trends. Profit warnings and EY ITEM Club publications Sector specific publications 9

11 Summary of our core team London London London Taylor Dewar Partner Mobile: Karina Brookes Partner Mobile: James Berkley Associate Partner Tel: Taylor is a qualified accountant and insolvency practitioner and leads our national employer covenant advisory team, which he established in He has been a partner in EY since He is recognised as one of the most experienced covenant advisors and has advised on some of the UK s groundbreaking pension transactions. He works with corporates, trustees, TPR and other advisors, and is retained advisor to a number of the largest schemes in the UK. Manufacturing transaction I advised a corporate on the covenant implications of a market leading, hostile takeover bid of a FTSE 100 Company in the automotive industry. This was the first transaction of its kind in 12 years! Education client We developed an integrated financial management plan for the Trustees of one of the UK s largest multi-employer schemes operating in the not for profit sector. Karina is a qualified chartered accountant and insolvency practitioner and leads EY s London covenant advisory team. Karina has over twelve years experience within pension advisory services, advising on some of the first scheme funding cases under the new legislation in Karina now advises on some of the largest UK pensions schemes on issues including scheme funding valuations, transactions, restructurings and scheme reorganisation. She has a background in financial restructuring and has spent time with a major US investment bank and the Pensions Regulator where she advised on over 100 complex cases. Engineering client I provided trustee-side advice in relation to the acquisition of a number of participating employers by an overseas parent. I also assisted in the negotiation of a parental guarantee. Consumer goods transaction I assisted trustees with guarantee negotiations following a transaction whereby the Sponsor was acquired by an overseas entity. James is a qualified chartered account ant and has specialised in analysing and advising on the strength of employer covenant and resulting negotiations since the creation of the Pensions Regulator. He has gained significant experience in assessing the impact of corporate transactions on pension schemes, and helping trustees, corporates and private equity agree appropriate mitigation for any weakening of support. In 2010 James completed a secondment to the Pension Regulator s Risk and Funding team, where he considered a wide range of schemes and situations from all industries. Insurance client I helped the trustees of this well known insurance group through several triennial reviews, a challenging negotiation around closure of the scheme, several corporate transactions, and helped them certify their asset backed funding structure for PPF purposes. Banking client I helped the trustees of this major bank understand their employer covenant and helped them consider how the ring fencing requirements would impact on covenant support for the scheme. 10

12 Summary of our core team Scotland and the Regions Jamie MacKenzie Director Mobile: London Chris Steven Director Mobile: London Heather Walker Director Mobile: Jamie is a qualified Chartered Accountant (CA) and a CEDR Accredited Mediator. He leads EY s national covenant advisory practice in Scotland and the Regions. Jamie has over 10 years experience providing covenant advice to trustees, corporates, regulators, the UK Government and international investors and has advised on a number of landmark regulatory cases. He also benefits from having undertaken a secondment to the Pensions Regulator. He is experienced in working with schemes of varying sizes and complexity, ranging from < 10 million to > 10 billion in assets and across numerous sectors. He also regularly presents at conferences and has run training sessions on all elements of covenant, integrated risk management (IRM) and monitoring. Construction client I provided trustee side advice to six schemes supported by a FTSE 250 construction, services and property group on covenant issues in relation to triennial valuations, the impact of corporate transactions, PPF guarantee certifications, a contingent asset and dividend levels. Pharmaceuticals client I advised the trustees of one of the world s leading pharmaceutical companies on covenant, affordability, implementation of a monitoring framework and agreeing a secondary funding objective with the corporate sponsor. Chris is a qualified Chartered Accountant (FCA) with over twelve years experience in corporate finance, including secondments to a clearing bank and to UK Government Investments. He has advised a number of different stakeholder groups in relation to the impact on covenant of restructuring, refinancing and M&A, as well as advising trustees and corporates in respect of triennial valuations. His portfolio of trustee clients includes schemes ranging in size from 100mn to 10bn of assets. Consumer goods client I provide ongoing covenant, monitoring and transaction advice to the trustees of three schemes with a common sponsor. This has included advice in respect of refinancing and other corporate activity. Utility provider client I support the trustees of a large utility company in respect of covenant, in particular sector challenges and changes in the regulatory environment. Heather is a qualified chartered accountant with a background advising on some of the largest and most complex restructurings in the UK. In 2013 she completed a secondment to HSBC s distressed lending team, advising the bank on some of its highest risk portfolio lends. Heather advises on some of our most complex schemes, mainly those reliant on support from large listed global groups. Her client portfolio encompasses schemes within the Industrial Products, IT Services, Retail and Property sectors. She also co-leads the industry s Women in Pensions network. IT client I advise the trustees to multiple schemes in relation to covenant, ABF structures and guarantee certification. Chemicals client I provide advise to the trustees of four schemes supported by a global, listed chemicals company. The schemes have a complicated security structure and we are helping them navigate a period of change within the organisation to determine any detriment to covenant. 11

13 Summary of our core team Leeds Trevor Oates Director Mobile: London Jo Nicholson Assistant Director Tel: Birmingham Rachel McCarthy Assistant Director Mobile: Trevor is a Chartered Accountant and during his time with EY has completed a secondment to a large high street bank. He has extensive experience advising pension trustees with regard to ongoing employer covenant matters in the not for profit, consumer goods and utilities sectors. Trevor has also advised on cases where the Regulator has enforced their powers. Alongside his pensions role Trevor also has extensive experience within our restructuring team advising on insolvency issues and Legal Entity Rationalisation projects. Not for profit client I assist the trustees in assessing and monitoring the covenant strength and affordability of contributions for a not for profit client. Consumer goods client I provide ongoing covenant advice to the trustees of a pension scheme supported by a food manufacturer. Advice included assistance in relation to the trustees interaction with TPR as part of TPR s proactive engagement relating to this scheme. Jo is a qualified chartered accountant with a transaction, diligence and restructuring background. Her particular specialism has been assisting clients review and improve cash flow forecasting and this has included a period of time seconded overseas. Over the last 5 years she has used this specialism to help her trustee clients understand the strength of employer covenant and assess the affordability of contributions into the scheme. She has experience across a number of sectors, in particular automotive, construction and support services. Jo is leading the team s development of new products, and is currently exploring the use of technology in helping trustees review and monitor the covenant. Automotive client I am a long term advisor to the trustees of three schemes, advising through triennial valuations, quarterly monitoring and ad hoc corporate events and transactions. Retail client We are on-going covenant adviser to the trustees of a major UK retailer with a significant ABF structure. We provide covenant monitoring and regular (quarterly) valuation of the ABF. Rachel is a qualified chartered accountant and insolvency practitioner. She has specialised in advising pension trustees and completed a secondment with the Pensions Regulator. Rachel is retained advisor to a portfolio of clients and has advised on a range of covenant matters including affordability, IRM, journey planning and impact of changes to indexation. She has experience across a variety of sectors including education, aerospace, not for profit, retail and banking and finance. Not for profit client I provide advice to charity trustees considering a switch from RPI to CPI to illustrate the enhanced security of member benefits post switch and ongoing valuation and covenant support. PPF I am part of an EY team that has been appointed to support the PPF in critiquing and assessing guarantor reports. 12

14 Summary of our core team Manchester Paul Taylor Assistant Director Mobile: Manchester Mike Holford Assistant Director Tel: Scotland Sarah Paul Assistant Director Mobile: Paul is a qualified accountant and insolvency practitioner based in our Manchester office. He has a wealth of experience advising trustee and corporate clients on a broad range of covenant issues across a number of different sectors. Paul also co-ordinates our work advising trustee clients on Pension Protection Fund contingent asset certification issues. Consumer goods client I helped to certify an Asset Based Contribution arrangement involving an ABC asset valued at 500mn. Aerospace and defence client I advise a global business with a foreign parent in relation to quarterly covenant monitoring. Mike is a qualified accountant with extensive experience working with corporates and trustees on triennial valuations and transactions (refinancing, M&A, restructuring). He has been involved in a number of RAA processes working closely with TPR and the PPF, and has significant experience dealing with stressed and distressed cases. UK Bank I advise the trustees of a UK bank and have set up an annual monitoring framework to provide intra-valuation support in respect of ongoing funding, affordability and restructuring programmes. Telcoms client I recently advised trustees to help understand the extent of any detriment to the scheme in respect of a proposed Flexible Apportionment Arrangement involving a business combination. The transaction involved the introduction of new debt and a group restructuring with scheme liabilities being apportioned to new entities within the group. Sarah is a chartered accountant through the Institute of Chartered Accountants of Scotland and a member of the Association of Business Recovery Professionals. She advises clients on a range of covenant related issues, and has experience across a number of sectors including Energy and Travel. Travel sector client I advise the trustee on its covenant provided by a large Nasdaq listed, Dubai based corporate. Recent work has included FAAs and asset backed security structures. Utility client I provide covenant monitoring and general covenant advice for two schemes sponsored by an energy company. Specific advice provided on the impact on covenant of the transfer of certain UK assets to an overseas entity. 13

15 Summary of our core team Scotland London London Karen Kirkpatrick Senior Executive Tel: Sacha Kilner Senior Executive Tel: Kathryn Todd Executive Tel: Karen joined EY in She is a Chartered Accountant and currently divides her time between London and Glasgow. Karen s has over seven years of restructuring and insolvency experience within Scotland, including formal insolvency appointments, business reviews, options appraisals and financial advisory. During which time she had responsibility for the day to day running of a trading whisky distillery for 16 months until its sale. Since joining the Pension Credit Advisory Team the majority of her clients have been based in Scotland and sit in the Financial Services, Education, Government Services and Regulated Power sectors. FS Transaction My team provided covenant advice to a leading financial institution regarding a proposed transaction to divest non core activities. Government Services client I provide ongoing covenant advise to the trustees of a pension scheme supported by a company in the Government Services sector with a US listed parent. Advice provided has related to IRM monitoring, considering the impact of refinancing on covenant and supporting the trustees interaction with TPR in relation. Sacha joined EY in 2010 with an initial focus on real estate, before moving into the restructuring team and gaining a broad range of experience. In 2015 she seconded to the Civil Aviation Authority where she spent time reviewing the business plans and financial risk of travel operators wishing to renew their Atol licences. On return from secondment, Sacha joined the Pensions Covenant team and has used this experience to help trustees and corporates assess the strength of the employer covenant. Sacha is responsible for developing and executing the team s business development strategy, including coordinating the sharing of our thought leadership, running trustee training events, and organising crossindustry networking events. Telecoms client I have assisted in providing covenant advisory services and PPF certification advice to four schemes of a global telco networks and service provider. Real estate client My team provided corporate side advice following the merger of two global real estate companies. Kathryn is a qualified chartered accountant. Kathryn joined EY s restructuring team in Glasgow before moving to London to focus on Pensions Covenant Advisory. She has assisted client through a variety of covenant reviews, regular covenant monitoring, certification of guarantees for PPF purposes and worked with EY s valuation team in implementing an asset backed funding structure. Kathryn is responsible for the day to day running of the Women in Pensions Network jointly set up by EY and Herbert Smith Freehills. Consumer goods client We are long term covenant advisors to the trustees of a well-known confectionary business advising on their triennial valuation, scheme mergers, FAAs and ad hoc advice as and when required. Construction client We advise the trustees of a UK construction company on the certifiable value of the PPF guarantee provided to 2 schemes following a corporate restructure. 14

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