Last-minute deal saves Toys R Us jobs

Beleaguered retailer to put £9.8m into pension fund to secure crucial backing for its restructuring plan

‘This offer goes a long way to addressing the PPF’S concerns and in derisking the pension scheme’

THOUSANDS of jobs at Toys R Us have been saved after the toy retailer struck a last-minute deal to pump more money into its pension fund in order to avoid toppling into administration.

The future of Toys R Us and its 3,200 British workers had been hanging by a thread after the UK’S pensions lifeboat threatened to vote against a company voluntary arrangement plan amid fears that it would further weaken the pension scheme.

Tense negotiations between the Pension Protection Fund and Toys R Us stretched until 3.50am the night before a creditor meeting yesterday, and an agreement was only reached after the vote was delayed twice.

The PPF ultimately reversed its position and supported the restructuring plan, along with 98pc of creditors, after Toys R Us agreed to pay £9.8m into its pension plan over the next three years. Under the terms of the CVA, Toys R Us plans to shut at least 26 stores, which still puts around 800 jobs at risk.

Malcolm Weir, at the PPF, said: “This offer goes a long way to addressing the PPF’S concerns and in derisking the pension scheme, offering greater protection for the current and retired members in the pension scheme.”

The retailer has increased its commitment for next year from £1.6m to £3.8m, with a promise to pay a further £6m over 2019 and 2020. The deal also sees the pension deficit recovery plan shortened to 10 years from 15 years, while the company has undertaken to seek additional support from its US parent for the pension scheme, once it has exited bankruptcy protection.

The PPF took a stern approach to negotiations amid increasing scrutiny about how effective CVAS are at ensuring a company’s survival following the demise of Store Twenty One, Austin Reed and BHS. The PPF had originally demanded a £9m lump sum from Toys R Us to boost the pension scheme, which the retailer said it could not afford without putting in jeopardy financing terms that had been arranged with its US parent. The American arm of Toys R Us was placed in Chapter 11 bankruptcy in September.

Toys R Us’s pension deficit has increased to around £30m on a PPF basis, which would mean a 10pc cut for pensioners if the company’s scheme was bailed out. On a full buy-out basis, the deficit has increased to £93m, according to Alan Rubenstein, the PPF’S chief executive. Toys R Us advisers at Alvarez & Marsal had said that the PPF would have only received £2m had the chain toppled into administration.

The CVA will mean that all Toys R Us shops will continue trading throughout Christmas until spring 2018. The retailer confirmed that there would be no changes to its returns policies or gift cards across the period.

Steve Knights, managing director of Toys R Us, said: “The vote in favour of the CVA represents strong support for our plan and provides us with the platform we need to transform our business so that we can better serve our customers today and into the future.”