Toys R Us Seeks Backing of Pension Lifeboat in Attempt to Save UK Business

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Toys R Us has proposed a new deal with the Pension Protection Fund (PPF) in a bid to save the company from going into administration in the UK which will result in the loss of 3,200 jobs.

The PPF wants £9 million up front in order for it to support a Company Voluntary Arrangement (CVA) that will allow the toy retailer to continue in business but would see at least 26 stores close and at least 500 redundancies.

Toys R Us is now proposing to reduce the timescale of its pension deficit recovery plan from 15 years down to 10 years, according to a report by Sky News, as a last resort measure to gain the Pensions Lifeboat vote.

Under the PPF scheme, the deficit is around £30 million, however, if the scheme was to be bought out by an insurer this increases to £93 million.

There 600 members of the direct benefit pension scheme, almost all of the members hold or have held senior appointments, middle management roles or head office jobs in the company during the past decades.

The frontline store staff of shop assistants, supervisors and retail managers will not receive any pension from this scheme. Instead, they can only be in an auto-enrolment scheme that the UK government in recent years has legislated for in order encourage more of the nation’s workers to have a private pension to supplement the state pension when they retire.

The PPF has a 20% share of the vote but a supermajority of 75% is required to approve the CVA, so with just a margin of 5% left, a few landlords – that may wish to lease to new tenants or redevelop sites – would be enough to see the CVA fail to gain approval and the company will then enter into administration.

Approval of the CVA would not guarantee Toys R Us’s future success and if it did fail at a later date and be liquidated, the PPF would be burdened with a greater financial responsibility than it does now if the company enters into administration in the next few days.

The PPF has already stated its intention to vote against the CVA, however, there is still time for it to change its mind and negotiations can continue until Thursday morning (21st December 2017). The PPF has appointed PriceWaterhouseCoopers as advisers during this process to assess whether the CVA would weaken the pension fund.

A meeting will be held tomorrow at 11 am (Thursday, 21st December) at The Montcalm  Hotel, Chiswell Street, London. Voting takes at a later time during an adjournment in the meeting, it is believed that proceedings will continue into the afternoon. A portion of votes has already been cast by those who do not wish to attend the meeting in person nor send a proxy.