Pension Corporation's bid to acquire rival Paternoster fails

26 May 2009

Edumund Truell's London-based Pension Corporation has failed to take over its rival London-based pension buy-out vehicle Paternoster headed by Mark Wood, a former Prudential executive.

Talks which had been in progress for several weeks failed over price last week, according to a person involved in the deal, leaving Paternoster unable to operate until market conditions improved.

There is little doubt about Paternoster's ability to continue to pay benefits to its roughly 100,000 pensioners, according to well informed sources, but the company has voluntarily changed regulatory permissions as it will not be taking on any new pensions business.

Capital bases at all life assurances and pensions businesses have been adversely affected as the crisis in credit markets has led to an increase in the cash reserves with the businesses needing to hold more cash as reserves against their liabilities towards policyholders.

Paternoster is unlikely to look for a deal with another investor as a person close to the company said it would not raise new capital until markets reopened. There would also not be much buy-out activity to pursue in any case, he added.

The growth of the buy-out market has come about around failed companies, however participants have looked at active businesses that might also want to offload risks related to corporate pension liabilities.