Properties remain widely used in asset-backed financing

By Bridging Loan Directory -

The use of properties remains highly popular in asset-backed financing but pension schemes are also starting to use new assets, a new report has found.

According to the 2011 asset-backed financing survey published by KPMG, asset-backed financing for pension schemes are increasingly growing, with £5bn (€5.7bn) of contribution recorded over the last two years, but properties are no longer the only assets used in this type of transactions.

Mike Smedley, pensions partner at KPMG in the UK, said: “This type of financing is becoming increasingly popular as businesses battle to reduce their pension deficits.

“When this type of financing first began to be used, it was only really large retailers using their property assets.  What we have seen more recently is that many more companies are looking at asset-backed financing to help reduce their pensions liabilities and they are using a much wider range of assets.”

Property remains the most popular type of assets for use in asset-backed financing, due to its readily available income stream and perceived high level of security for the pension scheme, but KPMG noted that the use of intellectual property, such as brands or even whisky, was also increasing.

The report also found that the growth was forecast to continue, with KPMG predicting asset-backed contributions to pension schemes to top £10bn in the next five years and that potentially up to half of the FTSE 100 could implement it.