The UK’s pensions lifeboat is currently considering whether to approve or reject a restructuring proposal for Toys R Us’s UK operations amid questions about a big loan write-off and bonuses awarded to company bosses. Sky News has confirmed that the pension trustees of Toys R Us in the UK have appointed PricewaterhouseCoopers to advise them on the restructuring plan unveiled last week. It also quotes sources suggesting that PwC’s appointment had been made with “the explicit encouragement” of the Pension Protection Fund, the industry-funded body which funds the retirement obligations of bankrupt companies with defined benefit pension schemes.
According to the report, the PPF and the trustees have not definitively decided to oppose the Company Voluntary Arrangement. However, insiders said this weekend that the PPF, which could end up taking on the scheme, was concerned that the CVA proposal may be “simply kicking the can down the road”. Previously, retailers including BHS, Focus DIY and JJB Sports have all used CVAs to exit loss-making stores, although all three companies ultimately succumbed to the fast-changing retail environment.
One pension industry source said the PPF shared reservations expressed by the Labour MP Frank Field, who chairs the Commons Work and Pensions Select Committee, about the decision by Toys R Us UK to wave loans worth more than £580m to a holding company in the British Virgin Islands.
The UK pension scheme is thought to hold roughly 20% of the creditors’ votes eligible to be cast in the CVA, giving it a potentially decisive say in whether the plan gets approved. In a statement issued on Sunday, a PPF spokesperson said: ”We are working closely with the trustees of the Toys R Us pension scheme given the current CVA proposals. The filing of CVA proposals means that an assessment period is automatically triggered for a pension scheme. However, this does not mean that the scheme, or its members, will be transferred into the PPF. Whatever the outcome of the CVA the pension scheme members can be reassured that they remain protected.”