MUMBAI: Tata Steel is exploring options of amending the structure of the pension scheme at its European subsidiary, which could include a revision in indices to which benefits are linked, or move a part of the pension corpus out of the company’s balance sheet.
According to people connected with the negotiations, Tata Steel is evaluating all options to make the proposed sale of the UK steel business more attractive to potential bidders. “These are complex issues, which would need approval of various stakeholders, including the UK government. It is a sensitive issue and has to be dealt carefully,” one person said.
Tata Steel did not respond to HT’s requests for comments.
Global brokerages, based on their interactions with managements, have said that the total pension liability is about £15 billion.
Tata Steel bought Tata Steel UK (formerly Corus) for $12.7 billion in 2007. The company has already initiated efforts to revise the pension framework, including defined benefit plans. The management said last year that such work has been initiated along with schemes’ trustees to “manage pension risks and ensure obligations remain affordable and sustainable.”
Tata Steel had proposed to sell its UK business, and has so far, received initial expressions of interest from seven players, including Sanjeev Gupta’s Liberty House, Excalibur Capital, Sajjan Jindal’s JSW Steel, distressed fund investor Wilbur Ross.
“The UK pension issue is complex. You have linkages to indices, like retail price and consumer price, both before and after retirement. Such linkages also come with a cap,” said Kulin Patel, director, Willis Towers Watson.