A dairy business employing hundreds of Midland workers has found a novel way of backing up its pension fund – using cheese.
Dairy Crest, which has its national distribution centre in Nuneaton and a technical centre in Telford, has backed up its pensions with £60 million worth of maturing cheddar cheese under innovative plans to bolster the scheme.
The move, which comes on the back of last year’s £341 million sale of its French spreads business St Hubert, means the group has agreed to offer nearly half of its valuable cheese stock as security for the pension fund.
The Cathedral City-maker will use the proceeds from the sale to pump in an extra £40 million to the scheme to help plug an £84 million pension deficit.
It will come as a boost to around 3,500 former milkmen and workers, as Dairy Crest has been battling to fill the hole in its final salary pension fund. It closed to new members in 2006 and shut to existing members in 2010.
Chief executive Mark Allen said: “Following the successful sale of St Hubert, we have now restructured our balance sheet, putting in place a more appropriate capital structure. This will reduce interest costs going forward and underpin the dividend and still gives us scope to invest to grow.”
Dubbed the “Bank of Dairy Crest”, the group’s cheese stock is worth around £150 million.
The cheese being used to back the pension fund is equivalent to 20,000 pallets.
Drinks giant Diageo struck a similar deal e in 2010 when it agreed to transfer millions of barrels of maturing whisky to the fund to close its funding gap.
Dairy Crest had been considering using the proceeds to make acquisitions, but said in February that any large deals were unlikely.
The group said it was still eyeing potential small deals.