While pension buyout and buy-in strategies are expected to grow in popularity as employers seek ways to curtail their defined benefit pension obligations, one U.K. employer found a unique way to remove pension liabilities from its balance sheet.

Advisers and trustees devised the plan to keep a group of defined benefit pension plan members out of the Pension Protection Fund, the U.K. equivalent of the Pension Benefit Guaranty Corp., when their employer's parent company — the guarantor of their pension plan — filed for Chapter 11 bankruptcy protection.

When Eastman Kodak Co. sought to reorganize under Chapter 11 protection in January 2012, its largest creditor was the U.K. defined benefit pension plan which had a claim for $2.8 billion, according to Grant Thornton U.K. L.L.P., one of the advisers to trustees of the plan.

Katie Banks, partner at Hogan Lovells International L.L.P. in London, said that while Kodak Ltd. was a relatively small part of the Eastman Kodak company, its pension fund was large. The pension plan needed $4.34 billion to secure members' retirement benefits, but had assets of only $1.51 billion, leaving a shortfall of $2.84 billion, according to Hogan Lovells.

Advisers to the trustees of the Kodak Pension Plan, the defined benefit pension plan of Kodak Ltd., devised a plan to secure the benefits of members of the plan while absolving Kodak of its liabilities to the plan.

Under the arrangement, Eastman Kodak transferred its personalized imaging businesses — Retail Systems Solutions, Paper & Output Systems, and Film Capture and Event Imaging Solutions — and its document imaging business to the U.K. pension plan.

Those businesses had a purchase price of $650 million, Grant Thornton said, and expected revenues over the long term of $1.3 billion.

“Working with KPP (Kodak Pension Plan) trustees and alongside the other advisers, we have developed an innovative solution that allowed the KPP's claims against EKC (Eastman Kodak Co.) to be settled,” Darren Mason, an advisory partner at Grant Thornton in London, said in a statement.

“The KPP now effectively owns the long-term income stream” of the two businesses, he said. “This provides the best possible result under the circumstances, not just for the members of the KPP, but also EKC, it employees and creditors.”

Ms. Banks said that the benefits promised under the Kodak pension plan were slightly reduced but remain above the level that members would have received had the fund been transferred to the U.K. Pension Protection Fund.

Pension plan members voted 94% in favor of the buyout arrangement, she said.

While it is unusual for pension plan trustees to be given companies to run, the outcome for the majority of pension plan members will be better retirement benefits than they would have received had the plan not been accepted, she said.