The Pensions Regulator (the Regulator) recently published a statement on financial support directions and insolvency to help banking, insolvency and restructuring professionals to understand the Regulator's approach to its Financial Support Direction (FSD) power in insolvency situations.
In 2010, the High Court ruled that FSD liabilities rank as an expense in an administration. This was upheld by the Court of Appeal last year. Concerns were expressed that the judgment could frustrate the administration process and make banks more reluctant to lend if their debt did not have priority over an FSD in insolvency.
There are substantial reasons why, in practice, fears about the potential impact of the Nortel-Lehman judgment upon the 'rescue culture' are unlikely to be realised. The Regulator has highlighted these issues before but is happy to be able to respond to industry requests for further reassurance with a published statement.
Stephen Soper, executive director for defined benefit regulation, said: "We fully recognise the importance of an effective restructuring and rescue culture, and do not intend to frustrate its proper workings, nor those of the lending market. We've met with many of the key players in the sector to explain our approach and we hope that today's statement provides further reassurance."
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