Health Care

Assurances sought on Toys R Us pension scheme

Assurances sought on Toys R Us pension scheme

A deal to rescue Toys R Us UK was hanging in the balance today after Pension Protection Fund (PPF) said it had failed to secure reassurances about the security of the Toys R Us retirement scheme and would vote against a store closure and rent reduction plan on Thursday.

Toys R Us, which has branches in Leeds, Wakefield, Bradford and York, previously announced plans to close 26 branches, with the loss of 800 jobs, under a company voluntary arrangement (CVA).

If the CVA doesn't get the go-ahead, the company could fall into administration, potentially putting all 3,200 United Kingdom jobs at risk of redundancy with less than a week to go before Christmas.

But the deficit is higher under the PPF's assessment and it is understood that the pensions lifeboat fears that pensioners and the fund will be left at risk without £9m in extra cash.

Work and pensions select committee chair Frank Field said: "It has also recently been reported that payments to the United Kingdom head of Toys R Us soared from £356,000 in 2014 to £1.3million for the year ending 30 January 2016and that the beneficiary of this surge in remuneration was the then managing director Roger McLaughlan". It was understood that the United Kingdom business did not have the necessary resources and its USA parent, saddled with £3.7bn of debts, had also gone bankrupt. The parent company filed for Chapter 11, the USA version of administration, in September after running up $5bn (£3.7bn) of debts.

Malcolm Weir, director of restructuring and insolvency at the PPF, said: "Given the position of the company, we strongly believe seeking assurances for the pension scheme is reasonable given the deficit in the scheme and questions about the overall position of the company".

PPF is open to changing its vote if Toys "R" Us U.K. comes up with an "acceptable" way of tackling the pension shortfall, it said in a December 19 letter to Field.

Concerns have also been raised about the write-off of £584.5m in loans owed by a Toys R Us firm based in the British Virgin Islands as part of a group reorganisation a year ago and what impact this might have on the pension scheme.

The offer however falls short of the PPF's demand for a £9m up-front contribution to the scheme - an equivalent of three years of company payments and associated levies - which according to sources and at time of reporting, Toys R Us has not found to pay.

All Toys R Us shops will remain trading through Christmas, but if the CVA is approved, those stores affected will begin closing from the spring.