Booze backs up this pension plan

Diageo, the maker of Johnnie Walker whiskey, will put millions of barrels of scotch into a trust to ensure pension assets will be in place if the company defaults.

By Charley Blaine Jul 2, 2010 9:27AM

Here's a nifty way to make sure a company has enough assets to cover its pension obligations.

Diageo (DGEAF), the maker of Johnnie Walker whiskey, has put away 2 million barrels of maturing whiskey from its distilleries in Scotland.

Diageo said Thursday it would transfer ownership of £430 million, or $645 million, worth of whiskey to a pension funding partnership.

Diageo employees would receive their pensions in cash, not whiskey, but the move does give them a guarantee that they would not walk away empty-handed if the company were to default.

Diageo was little changed in London today at 1,039 pence.

"A pension funding partnership will be formed, which will hold maturing whiskey spirit as assets," Diageo, which also makes Guinness stout and Smirnoff vodka, said in a statement.

As part of the deal, Diageo agreed to pay the pension partnership £25 million a year ($37.9 million) as it sells the recently distilled whiskey once it matures after three years and replaces it with new stock. The agreement would expire after 15 years, at which point Diageo would buy back the whiskey, which comes from distilleries such as Oban on the west coast of Scotland.

Companies are searching for new ways to reduce their pension deficits, which increase as people live longer, The New York Times noted. The British supermarket chain J Sainsbury (JSAIY) said earlier this year it would transfer property into a pension vehicle, while Whitbread (WTBCF) agreed to hand over a share in its portfolio of restaurants and hotels.

The investment firm Man Group moved some hedge-fund assets into a trust as a security for its British pension plan in March.

All of this suggests that it might be a good idea for, say, Constellation Brands (STZ) to put its maturing inventories of Robert Mondavi wines or Black Velvet Canadian whiskey into a trust. Or for Brown-Forman (BF.B) with its inventories of Jack Daniel's whiskey.

And we wonder if McDonald's (MCD) will park millions of cartons of frozen french fries to back its pension obligations, or if General Motors will back its pension plan going forward with inventories of Corvettes.

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