Monarch Airlines Retirement Benefits Plan Ltd., Luton, England, is expected to enter an assessment for entry into the Pension Protection Fund within a matter of weeks, said a spokesman for parent company Monarch Holdings Ltd.
The defined benefit fund had a deficit of £660 million, according to its financial report for the year ended Oct. 31, 2013.
The deficit has been resolved via an agreement between the fund trustee, the PPF and The Pensions Regulator. After Monarch enters the PPF, which takes on pension promises for U.K. DB funds of insolvent companies, the PPF will hold a 10% stake in Monarch Holdings, said a news release from the company. This type of arrangement is in line with the PPF's principles of restructuring.
The agreement allows the company to continue trading on exchanges, said Alan Rubenstein, CEO at the PPF, in a statement on the fund's website. “We have been in lengthy and detailed negotiations with the numerous interested stakeholders for some time to ensure that the interests of members and levy payers are protected.”
The move followed a review and restructuring of Monarch, which also saw Greybull Capital acquire a 90% ownership interest in Monarch Holdings.
The spokesman for Monarch declined to comment beyond confirming the contents of the news release.
However, a source familiar with the situation said that without the cooperation of the PPF, The Pensions Regulator and the trustee of the Monarch Airlines pension fund, it would not be possible for the company to be sold. That, said the source, would have led to the business and thousands of jobs disappearing. “No buyer was willing to buy Monarch from the selling shareholders with such a large pension deficit,” the source said.