When the manufacturer collapsed five years ago, the cost of the plan was expected to be between £800 million and £1billion, the Financial Times reported.
The terms of the arrangement, which have yet to be approved, include a cash payment of £255 million from the bondholders, who will then own Federal Mogul, T&N’s US parent company. But even after the payment, the plan will be left £150 million in the hole – an amount the PPF has agreed to take.
According to the Times, as of March 31, the assets of the car manufacturer’s pension scheme came in at about £975 million, which included the assets regained from its bondholders. However, without the intervention of the pension insurer, T&N’s scheme would have needed about £800 million to purchase the insurance needed to buy out all of the benefits it promised its pensioners.
The Times reported that pensioners will still face a sharp cut in their pension benefits because the full buyout cost of the scheme would have been about £1.8 billion, which leaves a sizable difference between what the PPF will actually offer them.