Private equity firm H.I.G. Group agreed to pay a £25 million ($35 million) settlement to the Silentnight Group DB Scheme, England, The Pensions Regulator said Tuesday.
The settlement followed TPR's anti-avoidance case against Silentnight's owner, H.I.G. Group, which acquired the bed manufacturer in 2011. At the time, Silentnight sponsored a defined benefit pension fund, which had a deficit. TPR said that as of December 2008, the deficit was £39.5 million, while a buyout deficit was £99.8 million.
In a statement Tuesday, TPR said that H.I.G. Group acquired indebted Silentnight Group and allowed it to become unneccesarily insolvent, causing the pension fund to fall into an assessment period for entry into the Pension Protection Fund, London — the lifeboat fund for the plans of insolvent U.K. companies. H.I.G. Capital then bought the business out of administration.
Despite the settlement and the proceeds, however, the pension fund, which has 1,200 participants, is still expected to transfer to the U.K. lifeboat plan for insolvent employers, the regulator said. The PPF has £36.1 billion in assets.
Together with proceeds from the insolvency process and the settlement, the pension fund received about £35 million.
"We believe this is unacceptable and it was vital we acted, in part as a deterrent against this type of behavior in the future," Nicola Parish, executive director of frontline regulation at TPR, said in a news release Tuesday.
An H.I.G. Group spokesman declined to comment. A spokeswoman for the PPF said the fund remains under PPF assessment.
"The Pensions Regulator has powers to investigate, and where appropriate take action, using its anti-avoidance powers to protect defined benefit pension scheme members and the PPF. We recognize that any regulatory intervention which results in further recoveries can benefit the PPF where it mitigates the impact of, or even prevents, a future claim," a PPF spokesman said.