Pension Protection Fund’s refusal to back restructuring unless retailer pays £9m into fund could push chain into administration

This article is more than 2 years old

This article is more than 2 years old

Toys R Us UK is facing potential collapse this week with the loss of 3,200 jobs as it struggles to win the support of the state-backed Pension Protection Fund (PPF) for a planned restructure.

The PPF, the industry-funded, state-backed safety net, demanded that the troubled retailer pump about £9m into the ailing Toys R Us UK pension fund.

This is in order to gain the PPF’s support for the retailer’s planned company voluntary arrangement (CVA) procedure, which involves the closure of at least 26 loss-making stores. That deal would lead to the loss of up to 800 jobs.

The insolvency procedure automatically pushes Toys R Us’s pension fund into assessment by the PPF, giving it a key vote at the meeting and the potential to block the process.



If the CVA does not go ahead, sources close to the company said it was likely to fall into administration with the potential closure of all 84 permanent stores and about 20 more pop-ups, putting all 3,200 UK staff at risk of redundancy.

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Toys R Us Holdings’ latest set of accounts filed at Companies House show a pension deficit of £18.4m in January, up from £10.25m a year before.

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.

However, it is understood Toys R Us’s UK business does not have the resources to meet that demand.

The group’s US parent is also unable to lend its UK subsidiary the cash under the terms of its court-led bankruptcy protection. The parent company filed for Chapter 11, the US version of administration, in September after running up $5bn (£3.7bn) of debts.

Malcolm Weir, director of restructuring and insolvency at the PPF, said the body had yet to decide how to vote: ‘‘We are seeking to fully understand the current position of the company, including its future potential, position of the US parent and the reported historic financial transactions.

“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.

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

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 last year and what impact this might have on the pension scheme.

When it announced plans for the CVA, Toys R Us said it had an ongoing arrangement to make additional contributions concerning the deficit and the insolvency process would not change that.

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.

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