Pension doubt over Toys R Us
THE future of Toys R Us in the UK was thrown into doubt yesterday after one of its main creditors said it would vote against a rescue deal.
The Pension Protection Fund indicated it would not back restructuring proposals unless the retailer injects £9 million into its retirement fund.
Failure to win the support of the UK’s pensions lifeboat could push the business into administration, putting more than 3,000 jobs at risk.
Last month Toys R Us, which trades from 84 UK stores and has 21 concessions, said it was working on a company voluntary agreement (CVA), that would lead to the closure of 26 loss-making stores, with up to 800 jobs going. Its US parent filed for Chapter 11 bankruptcy protection in September and would be unlikely to pay into the UK pension scheme, which has an estimated funding shortfall of £25-35 million.
Malcolm Weir, pictured, the PPF’s director of restructuring and insolvency, said: “We can confirm that the PPF has today submitted its proxy vote on the proposed Toys R Us CVA by the required deadline. We have indicated we intend to vote against the proposals. Since the company lodged the CVA proposals, we have spent significant time and effort, with the help of PwC, assessing the current and future financial position of the company to ensure the pension scheme would not be weakened by the CVA, leading to an even bigger claim on the PPF and its levy payers further down the line. Given the position of the company, we strongly believe seeking assurances for the pension scheme is reasonable given the deficit in the scheme and questions about the overall position of the company.
“We remain in dialogue with the company and their advisers and we are able to amend our vote if suitable assurances are provided.”
The PPF’s suggestion that it could change its vote is set to trigger an intense round of talks before a creditor vote tomorrow. The £9million it is demanding is understood to cover three years of deficit contributions that Toys R Us UK was scheduled to make to the retirement fund.
Toys R Us said on announcing its CVA plans that trading had suffered as its warehouse-style stores, opened in the 1980s and 1990s, have proved “too big and expensive to run”, while it is also understood to have struggled to keep up with online competitors.