Drinks giant to use whiskey as pension collateral
Drinks giant Diageo yesterday unveiled a novel initiative to plug its pension deficit that will see it use barrels of whiskey as collateral.
The Bushmills whiskey maker said it had agreed a funding deal to transfer £500m worth of maturing whisky to trustees of its pension scheme.
Diageo, which also makes Johnnie Walker whiskey, said the move would immediately help to reduce the deficit - estimated last April to have widened to nearly £900m - and form the centre piece of a 10-year funding plan.
The whisky assets will be used to provide an annual income into the pension scheme, while at the end of the agreement the trustees can also sell the whiskey back to Diageo for up to £430m to cover any remaining funding gap.
Diageo has committed to buying the whiskey from its pension fund every three years, transferring younger barrels back in to keep the value constant.
It will pay £25m a year into the fund in return.
The group said that together with payments into the Irish scheme, this arrangement would see annual contributions remain in line with the £50m it has paid in every year since 2007.
Diageo also released £197m into the scheme to help fill the pension hole.
The unusual deal follows the triennial valuation of the Diageo pension scheme last year, which revealed an £862m deficit and sparked the need for a 10-year funding plan.