Pensions Conference 2011. Review of Workshop E5: Intangible asset securitisation

Download the paper here

At the recent pensions conference, David Robbins of Deloitte and Stuart Whitwell of Intangible Business spoke on the topic of intangible asset securitisation.

For many companies, pension scheme deficits represent a significant operational and financial risk to the business.   Asset-backed funding, when used appropriately, can provide a proactive means of immediately funding a significant proportion of deficit whilst, in the short term, preserving cash in the business.  This session discussed the suitability of using intangible assets, such as brands, in these structures.

The session covered the methods for valuing intangible assets and the suitability of different brands for pension schemes.  It also explained how asset-backed structures typically work, whereby the employer establishes a limited partnership into which group assets are transferred.  The pension scheme is then provided with an investment which is collateralised by the valuable company assets which are ring-fenced for the benefit of the scheme.

The key issues for companies and trustees were discussed, as well as a comparison with alternative assets.  The session then concluded with a case study of TUI Travel PLC who in May 2011 announced the implementation of a groundbreaking Pension Funding Partnership using solely brand assets as security. Deloitte and Intangible Business advised on the implementation of the scheme.

Overall, the session was well received by the audience and invoked some interesting questions, in particular around the commercial aspects of asset-back structures and the complexity of the implementation.

The lasting message was that asset-backed structures are becoming more widespread, and as demand for innovation in pension funding increases, the use of intangible assets to support pension scheme deficits could become increasingly more common.