TOYS R US ON THE BRINK
3,200 face Xmas axe as UK’s biggest toy store hit by financial crisis
UP to 3,200 Toys R Us staff are facing the sack at Christmas with the store close to collapse following plunging sales.
It will go into administration unless a rescue deal is agreed this week amid losses of £500,000.
And a regulator is demanding £9million to protect pensions. But a source said: “The firm’s hands are tied. The £9million is not available.”
THE future of beleaguered Toys R Us lies in a crunch meeting this week where bosses hope to thrash out a deal to rescue the store.
But it faces a major stumbling block in the shape of The Pension Protection Fund which is demanding £9million before it agrees to any package.
And if the deal is rejected, the firm will be plunged into administration – putting 3,200 jobs at risk just before Christmas.
A source close to the process admitted ominously: “The company’s hands are tied. The £9million is not available.”
It has been left reeling by big outgoings and cut-throat competition.
Accounts show Toys R Us sales in the UK and Ireland have slumped by a quarter since 2008, from £566million to £418million last year when it made a £500,000 operating loss.
It recently announced plans to use a Company Voluntary Arrangement to close at least 26 of its shops, putting up to 800 jobs at risk, in a bid to stop it going under. But any job losses are bound to spark fury among staff after it emerged former UK boss Roger McLaughlan’s salary and bonus trebled from £356,000 in 2014 to £1.3million, shortly before announcing the CVA package. The store, Britain’s biggest toy chain, needs 75% of creditors – those it owes money – to approve the deal at a meeting on Thursday.
But if the PPF, which controls a big chunk of the vote, does not get the £9million it wants to give current and former staff peace of mind, the CVA deal could be off.
It is equivalent to three years’ normal pension contributions –and similar to the amount Toys R Us pays its US parent company ever year for using the name. The Mirror understands the pension scheme black hole has leapt to between £20million and £30million, or £90million in a worse case scenario. PPF director of restructuring and insolvency Malcolm Weir said: “We continue to work closely with the trustees of the Toys R Us pension scheme and appointed advisors given the CVA proposals. We have yet to decide how the creditor rights will be exercised in the CVA vote. We are seeking to fully understand the position of the company, including its future potential, position of the US parent and the reported historic financial transactions.
“The pension scheme is already underfunded and, if we were to vote in favour of the CVA, we would need actions taken that ensure the position of the pension scheme was not going to further weaken.”
The US owner separately filed for bankruptcy protection in September
The firm’s hands are tied. The £9million is not available SOURCE ON TOYS R US PENSIONS BLACK HOLE
and is said to be looking to close at least 100 stores there because of weak sales. That comes after a pledge by chief executive Dave Brandon to open shops.
Labour MP Frank Field yesterday cranked up criticism of Toys R Us.
He has questioned why the UK arm wrote off £585million in loans to a related company in the British Virgin Islands last year.
Mr Field said: “As with BHS, the trustees and pensions regulator were kept in the dark. The pension scheme is, at best, an inconvenient afterthought to self-interested corporate restructure.
“The puny regulatory system only kicks in once the damage is done.” Toys R Us declined to comment.
Its decline comes amid high street carnage, with stores hit by a toxic mix of soaring costs and households reining in their spending after a rise in inflation.
Last month, grocery wholesale giant Palmer & Harvey went bust, with the loss of 2,500 jobs.