Diageo To Use Maturing Whisky To Plug Pension Gap

1st Jul 2010 07:48

By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Global drinks giant Diageo PLC (DEO) said Thursday it's transferring some of its maturing whisky assets to its pension fund as it seeks to plug its GBP862 million pension deficit. The company said in a a statement it has agreed a 10-year funding plan with the trustees of its U.K. pension scheme. As well as paying GBP197 million into the U.K. scheme, Diageo said it was setting up a partnership to hold maturing whisky as assets. This partnership will provide an income to the scheme of about GBP25 million each year. After 15 years, the pension trustees will sell its share of the partnership back to the company for no more than GBP430 million. A number of U.K. companies including hotel and restaurant group Whitbread PLC (WTB.LN), J Sainsbury PLC (SBRY.LN) and Marks & Spencer Group PLC (MKS.LN) have recently set up similar schemes to plug their pension deficits. All of these schemes have used property assets to boost their pension funds. As the world's largest whisky producer, with brands such as Johnnie Walker and Talisker, Diageo will use some of the highly valuable barrels of whisky is has maturing in warehouses across Scotland. Given that Diageo has been paying GBP50 million per year to its U.K. scheme since 2007, the new pension provisions will be broadly cash flow neutral and will have no impact on the value of Diageo's net assets. Diageo said that its "significant" pension deficit of GBP862 million was due to the valuation being carried out during "an unusually volatile" time, with historical lows in both asset values and interest rates. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires July 01, 2010 02:48 ET (06:48 GMT)