£9m pension talks hold key to future of Toys R Us

THE UK’S pension scheme “lifeboat” looks set to vote against Toys R Us’s restructuring plans this week, amid a stand-off over whether the retailer can pump £9m into its pension scheme.

The Daily Telegraph understands that the Pension Protection Fund (PPF) is demanding the funds within two months in an attempt to secure the future of the pension scheme should Toys R Us’s rescue plan fail. The amount is equal to that which would be put into the pension scheme over the next three years.

The PPF, whose vote is likely to determine whether or not the plan ultimately gets the go-ahead, will need to formally lodge papers on its decision by midday. The vote is on Thursday.

Toys R Us requires 75pc of its creditors, including landlords, to support the company voluntary arrangement (CVA) at the vote. If the CVA is given the green light, at least 26 of the chain’s shops will close, meaning as many as 800 jobs will be cut. Landlords would also take substantial rent reductions.

However, sources close to the process said Toys R Us’s hands are tied as it does not have £9m to put into the pension fund. Its US parent firm filed for bankruptcy in September and, under the terms of its court-led bankruptcy protection, is unable to lend the UK group the funds.

The sources added that the decision over whether to back the CVA was a binary one for the PPF, but that if they voted against the restructuring, it would be very likely that Toys R Us would fall into administration, putting as many as 3,200 jobs at risk.

The Daily Telegraph understands that the PPF is working on the basis that if the CVA is not passed at the meeting, Toys R Us will come up with a new solution. Malcolm Weir, director of restructuring and insolvency at the PPF, said: ‘‘We continue to work closely with the trustees of the Toys R Us pension scheme and externally appointed advisers given the current CVA proposals. We have yet to decide how the creditor rights will be exercised in the CVA vote. 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.”

Mr Weir added: “Whatever the outcome of the CVA, the pension scheme members can be reassured that they remain protected.”

It is thought that the pair are still in active talks.