Bradstock plan removes company from £14m deficit
Reinsurance broker Bradstock is to bail out its pension scheme by issuing new shares in the company, giving the scheme a stake in future profits and other payments.
The deal will leave the company with enough money to keep it going for at least 12 months, the broker said.
The company needed to make extra payments into the pension scheme because it was found to have a £14m deficit when it was valued on 30 September 2001.
Under the terms of the settlement, Bradstock will pay £480,000 immediately and issue 3.3 million new shares to the pension scheme.
This represents 5% of the current issued share capital.
The pension scheme will hold the shares as an investment.
Sources close to the deal said the broker had signed the deal on the proviso it "waived its responsibilities" for the scheme's on-going debt and gave it "clear bluewater" between itself and the pension crisis.
It now had a platform to sort out its "capital-raising" problems, which may include a merger or writing new lines of business in the future.
Bradstock will also pay 15% of its post-tax profits until 2006, up to a maximum of £2m, into the scheme.
It will also pay half of any net proceeds it makes by selling its subsidiary Bantam Insurance Company, its assets or shares or any dividend or payback of capital from Bantam.
Bradstock will also pay between £200,000 and £3.5m to the scheme as a share of credit write-backs. These are sums left in an broking account.
Bradstock's shares were trading at 3.5p on Tuesday.