British Airways will reclaim a $540 million bank line of credit it had issued to its pension funds as contingent assets to shore up the airline's cash reserves, the company said today.
The pension funds are the £5.9 billion ($9.7 billion) Airways Pension Scheme and £6 billion New Airways Pension Scheme, both of London. Both are closed to new members.
The bank guarantee was given in 2006 to the funds, which would have gotten the money only if BA became insolvent, according to a company news release. BA can now draw on the credit any time before June 2012.
“We do not know if the (pension fund) trustees were offered anything else in return,” Danny Vassiliades, principal and head of corporate advice at actuary Punter Southall, said in a separate news release commenting on the announcement. “Had BA gone insolvent with a big enough deficit in the scheme, the guarantee would have benefited the (Pension Protection Fund) rather than members. This may have been a consideration for the trustees in choosing to give it up.”