17 Mar 2014: PPF guarantees harder to certify
As the 31 March deadline for certifying guarantees looms, some schemes will have struggled for the first time to certify their guarantees (‘Type A contingent assets’).  The declaration that trustees have to make is unchanged – they must have no reason to believe that the guarantor at the date of the certificate could not meet its full commitment under the guarantee.  The difference is that PPF's December 2013 guidance for the 2014/15 levy year provides greater clarity on the factors it expects trustees to consider before making the certification.

In particular when considering the resources the guarantor has available to meet a claim, the knock-on effects on the guarantor of the sponsor’s insolvency should be considered.  This might involve a material fall in the guarantor’s assets given the sponsor is worth less and the guarantor may be unable to make a meaningful recovery from any intra-group amounts owed by the sponsor.  Moreover there may be additional claims on the guarantor under cross-guarantees.  These, together with potentially a section 75 claim under the scheme guarantee, may be sufficiently material to lead to the guarantor’s insolvency.

For guarantees for the 2014/15 levy year, trustees will have had to look more closely at group structure and intra-group obligations to be able to certify the guarantor will be able to meet its commitments.  In some cases this will involve a proportionate insolvency analysis (‘outcome statement’) and even a valuation of the remainder of the guarantor’s business to understand the resources available to the guarantor to meet a claim.

Argyll comment:  There are just under 2 weeks to go to the deadline for certifying guarantees so there is still time to carry out the necessary analysis.  For further details contact Richard Hall or Sean Weaver on 020 3755 5300.

Clear and concise analysis
Our approach
Our experience