Judge raises concerns Aer Lingus plan will hit pension fund
A HIGH Court judge has expressed concern about aspects of an application by Aer Lingus Group plc for approval for a €500m share capital reduction in a situation where there is a €700m shortfall in the Aer Lingus pension fund.
After Mr Justice Peter Kelly raised the pension deficit in court yesterday he was told the matter may be the subject of litigation.
Paul Sreenan SC, for Aer Lingus, said the company took the view it had met all its obligations concerning payments but it anticipated there could be litigation or "industrial relations problems". There was no contingency provided for in relation to any such litigation, he said.
Mr Sreenan said the pension scheme was a shared pension scheme.
The issue was known about for some time and the company's legal advice was it would not be compelled to fund a deficit, he added.
Mr Justice Kelly said the court would require some assistance on the pension fund issue before it would permit the share capital reduction sought.
He agreed to Mr Sreenan's application to transfer the application for approval for the share capital reduction to the Commercial Court and listed it for hearing on July 18.
Mr Sreenan said a supplemental affidavit would be provided to address concerns. he also indicated the existing level of distributable reserves was sufficient to pay a 3pc share dividend and payment of any further dividend would depend on the company's performance.
The company is seeking approval for reduction of its non-distributable reserves from some €859.4m to €359.4m so as to allow for €500m to be credited as a profit available for distribution in the reserves of the company.
The application was grounded on an affidavit by Aer Lingus Group chief financial officer Andrew MacFarlane.
Mr MacFarlane said the company had, in December 2011, an aggregate balance on its share premium account, capital conversion reserve fund and capital redemption reserve fund of some €860m with distributable reserves of some €57.3m.
The company was seeking approval for reduction of the two capital funds, and part of its share premium account, by up to €500m of its non-distributable reserves, he said. The proposed reduction would not affect the solvency of the company, he said.