Diageo did it with whisky, other companies have done it with shares or properties. But today Dairy Crest gave secure backing to its own pension fund with cheese.
To be precise, 20 million kilogrammes of the stuff or 20,000 one-tonne pallets, each carrying a cubic metre of the firm’s best-known cheddar Cathedral City. While the cheese is manufactured in Davidstow, Cornwall, it is moved to a massive temperature controlled warehouse in Nuneaton, Warwickshire, where it matures for an average of 12 months before it is cut, packaged and labelled.
Dairy Crest has some £150 million worth of maturing cheese at any one point. It has pledged £60 million of this to the pension fund trustees which — in the highly unlikely event of the fund going bust — they could sell. This strengthens the pension fund while at the same time allowing Dairy Crest to hold onto and use cash in its business.
The company is using the £344 million it collected when it sold its French spreads business St Hubert to cut its bank borrowings and improve the pension fund.
A new bank facility and buying back £100 million worth of loan notes will reduce interest charges by some £7 million a year.
The pension fund is to receive an extra £40 million one-off payment alongside the continuing £20 million annual payments that are being made to reduce the fund’s deficit.
Dairy Crest closed its final salary pension scheme, which has just over 3000 members, in 2010.
