MPS demand explanation on Toys R Us pay
Troubled toy retailer urged to shed light on huge rises in executive salaries, while company suffered losses
MPS have written to Toys R Us demanding an explanation for why the struggling retailer handed a bumper pay increase to bosses, despite falling sales and growing losses that are threatening its survival.
Frank Field MP, chairman of the work and pensions committee, yester- day wrote to Toys R Us boss Steve Knights, citing The Sunday Telegraph’s exposé of how the salary for Roger Mclaughlan, former chief executive, was boosted from £356,000 to £1m in 2015, and a further £1.3m in 2016. “This occurred during a period of substantial operating losses for the company and sustained deficit in the staff pension scheme,” Mr Field said. “On what basis did the board determine the appropriate distribution of company resources to executive pay packets and the financing of employees’ pension benefits respectively,” Mr Field asked. The future of Toys R Us and its 3,200 workers has been plunged into doubt after the UK’S pensions lifeboat confirmed yesterday that it would vote against a life-saving plan to cut its rent bill by closing a quarter of its 105 shops.
Toys R Us administrators at Alvarez & Marsall and the Pension Protection Fund are now locked in tense negotiations ahead of a meeting tomorrow, which requires 75pc of creditors to approve the company voluntary arrangement (CVA). The PPF is Toys R Us’s largest single creditor and carries around 30pc of the votes.
The PPF has said it is concerned that Toys R Us’s CVA proposal to close 26 stores would further weaken the pension deficit, which has 600 members and is currently estimated at £93m on a buyout basis.
As a result, it has demanded a £9m lump sum from Toys R Us to give it comfort about the future necessary payments to the company’s pension scheme, which otherwise would be due over the next three years. The PPF said that it had not received “sufficient assurance and mitigation” that the CVA would not weaken the pension scheme.
Insiders said that the demand from the PPF was an attempt to “play hardball” in the wake of the collapse of BHS, which put 20,000 pensioners at the risk of pay cuts.
However, Toys R Us has insisted that it has insufficient funds to make a £9m payment and argued that the PPF is putting itself ahead of the ranks of landlords who will lose out directly from the CVA.
Toys R Us has also said that it is unable to draw any additional financial support from its US parent while it is in bankruptcy protection for the next year. The UK company has said that sales are already 6pc lower than last year and it is thought recent bad weather has hurt revenues further during the peak trading season.
As a result of Toys R Us’s cash crisis, insiders said the PPF was still leaving the door open for further negotiations and it could change its vote decision if it was given sufficient comfort.