Employer Covenant Reviews
- Our Approach

We undertake our covenant appraisals on both desktop and in-depth bases, as appropriate to the circumstances.

We will review recent financial information and trading performance to consider the current financial position of the employer.

As important as the recent financial history can be however, we place more emphasis on the potential financial future. Therefore we also consider how viable a business is. We will review forecasts, and assess them for reasonableness. Our robust approach means we will challenge and review assumptions, to ensure the most appropriate approach is being taken.

For many years our approach has also included a longer-term view of the Employer's prospects; considering the drivers of the business, its competitive environment with our own sector research, alongside any other relevant prevailing factors.

Cash flows are an important part of the employer covenant and we subject these to the same scrutiny, as well as analysing them to help assess free cash flow and reliability. 

Ideally, we also carry out our work by interviewing company management, discussing with them the business performance, their forecasts for the business and their view of the outlook for the sector.

Our work will also typically include an assessment of the financial outcome for the scheme in an insolvency, as a 'stress-test' on the balance sheet, and to inform trustees on the full range of options and outcomes of those decisions.

 

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