Citi shifts 1.5 bln stg of EMI pension risk in landmark deal

LONDON, July 9 Tue Jul 9, 2013 8:32am EDT

LONDON, July 9 (Reuters) - Citigroup has shifted responsibility for paying the pensions of 20,000 past and present staff of EMI Group to Pension Insurance Corporation in a landmark deal relieving the bank of up to 1.5 billion pounds ($2.2 billion) of liabilities.

The bank, the latest employer to insure against lengthening lifespans which impose hefty extra costs on retirement funds, is paying the specialist insurer an undisclosed fee in the largest UK pension risk transfer to date, Citi and PIC said on Tuesday.

The deal is the biggest since Legal & General took on 1.1 billion pounds of pension liabilities from the T&N Retirement Benefits Scheme in 2011, according to data from Towers Watson, which advised the trustee for the EMI deal.

Citigroup seized the music company in February 2011 from British financier Guy Hands after the private equity firm, Terra Firma Capital Partners, defaulted on its loans and was unable to support EMI's debt load.

Citigroup eventually sold EMI in pieces in 2011, but kept the pension fund to help facilitate the other sales. The deal with PIC, known as a 'buyout transaction', means all the 20,000 members of the pension fund will receive their full pensions.

Citi is no longer responsible for finding extra funds to support scheme members who live longer than expected.

"I have written to the Fund members telling them that their benefits have been secured in full with PIC; as a trustee, fully securing benefits is the ultimate goal," Clive Gilchrist of BESTrustees and chairman of the trustee company that manages the EMI pension scheme, said in a statement.

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