Toys R us staves off collapse after talks with key creditors
TOYS R Us was yesterday handed a lifeline in the face of potential collapse which could have seen the loss of 3,200 jobs.
The toy retailer looks to have staved off the threat of administration after the Pension Protection Fund (PPF), a key creditor to the retailer, agreed to a restructuring plan that will secure around 2,500 jobs.
But the move will not affect plans already announced to shut dozens of large stores across the UK, including the outlet at Cardiff Bay.
At the beginning of the month the toy store chain announced it was instigating a Company Voluntary Arrangement (CVA) in which the company will seek creditor approval to reposition its real estate portfolio for future growth and profitability.
The company announced its branch in Cardiff Bay was to close as part of a nationwide “transformation” that was to see 26 branches closing.
A branch in Swansea and a pop-up store in Cardiff city centre were not affected by these closures, but their futures were thrown into doubt before yesterday’s decision.
The PPF held the crucial vote in the decision and an agreement has been reached – with 98% of Toys R Us creditors voting in favour of the arrangement.
Commenting on the successful vote, Steve Knights, managing director of Toys R Us UK, said: “We are pleased to have secured the support of our creditors and will be working closely with them in the months ahead.
“The vote in favour of the CVA represents strong support for our business plan and provides us with the platform we need to transform our business so that we can better serve our customers today and long into the future.
“All of our stores across the UK will remain open for business as normal until spring 2018. Customers can continue to shop online and there will be no changes to our returns policies or gift cards across this period.”
Malcolm Weir, the PPF’s director of restructuring and insolvency, said: “We have been working closely with Toys R Us and their advisers in the run-up to the CVA vote.
“We can confirm that an agreement has now been reached and we will now be voting in favour of the proposals at the CVA meeting today.
“The company has agreed to pay £9.8m into the pension plan, composed of £3.8m in 2018, with a further £6m promised over 2019 and 2020.
“The deal also sees the pension deficit recovery plan shortened to 10 years, while the company has undertaken to seek additional support from the US parent company for the new plan for the pension scheme. Furthermore, the trustees will have greater powers if any of the above conditions are not met.
“This offer goes a long way to addressing the PPF’s concerns and in de-risking the pension scheme, offering greater protection for the current and retired members in the pension scheme.
“The PPF will always seek assurances on behalf of the pension schemes and pension scheme members it protects, as well as consider the interests of other UK companies that pay the Pension Protection Fund levy.”
Graham Barker, chairman of the trustees, and Tom Lukic, director with Dalriada Trustees Limited, appointed as professional trustee to the scheme, said: “Whilst the trustee board very much appreciate the impact of the CVA on a number of employees and stores, we are pleased that agreement has been reached for the PPF to vote for the CVA.
“We will be writing to update all scheme members as soon as the result of the vote is known.”
Toys R Us is yet to make a statement on the agreement.
Julie Palmer, retail expert at BTG Advisory, part of the accountancy firm Begbies Traynor, told the BBC that the CVA could just be putting off the inevitable: “It’s a little bit of a moral dilemma... is the CVA going to make the position of employees worse or is it going to make it better?
“It might make it better in the short term if it preserves jobs, but if all that’s going to do is postpone the pain and potentially increase the deficit at the pension fund, then that might long term make their position worse.”