Indian steel giant Tata Steel has reportedly offered to pay "hundreds of millions" of pounds to its 130,000 member-strong pension scheme in the UK to facilitate a merger of its European steel business with German steel giant ThyssenKrupp.
Indian steel giant Tata Steel has offered to pay "hundreds of millions" of pounds to its 130,000 member-strong pension scheme in the UK to facilitate a merger of its European steel business with German steel giant ThyssenKrupp, a media report said on Saturday.
"We are in meaningful negotiations with the company (Tata Steel) now. We've had an improved offer for the release of the security package," Allan Johnston, chairman of the pension scheme's trustee board, was quoted as saying by the The Financial Times.
The infusion of funds into the 130,000-member pension scheme is aimed at releasing a guarantee the fund holds over the Indian steel major's Dutch assets, the report said.
The British Steel Pension Scheme (BSPS) has a guarantee over Tata Steel's Ijmuiden plant in the Netherlands, which provides financial protection for the scheme by giving its trustees a right over the assets in certain circumstances.
Tata wants to buy out these claims to facilitate a merger of its European business with that of its Germna rival ThyssenKrupp.
Tata Steel wrote to the UK's Pensions Regulator this month, attempting to demonstrate that its UK subsidiary was close to insolvency, said Johnston.
This is a pre-requisite for obtaining a regulated apportionment arrangement, a rarely used mechanism aimed at helping financially distressed companies by freeing them of retirement obligations.
"We continue to have discussions with the employer and the trustees about the future of the British Steel Pension Scheme," the Pensions Regulator said. "There are still significant issues to be resolved and we will consider any proposals carefully in light of their impact upon the 130,000 pension scheme members and PPF levy payers."
Tata Steel had reached an agreement with trade unions at the end of last year to invest in its UK business and save thousands of jobs in the UK.
"The proposed changes to future pension provision and other employment terms are necessary to de-risk the company and help achieve long-term sustainability. We are also working separately on a necessary structural solution for the British Steel Pension Scheme fund," Koushik Chatterjee, Group Executive Director Tata Steel and Executive Director for Tata Steel's European business, had said.
The company is yet to confirm the latest funds infusion into the scheme.
Thousands of UK steelworkers are expected to vote at the end of this month on the firm's rescue package, which had proposed replacing the BSPS with a new system.