Written by: Keith Tully
Published: 19th December 2017
Concerns raised by the Pension Protection Fund (PPF) have cast serious doubt over the viability of a plan designed to financially restructure and rescue the UK operations of the struggling retailer Toys R Us.
The company announced in early December that it would close 26 UK stores and shed up to 800 jobs but its failure to secure a rescue deal could soon see a total of 3,200 members of its workforce facing redundancy.
A company voluntary arrangement (CVA) deal has been proposed and put to all relevant creditors and stakeholders, including the PPF, which is concerned that the deal would do too much damage to an already weakened pension situation at Toys R Us in the UK.
“We continue to work closely with the trustees of the Toys R Us pension scheme and externally appointed advisors given the current CVA proposals,” said Malcolm Weir, director of restructuring and insolvency at the PPF.
“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,” he said.
The PPF has told Toys R Us’ directors that they need to add an amount totalling £9 million into their company’s pension fund in order for the terms of the CVA to be deemed satisfactory.
The company only has until Thursday December 21st to find those amounts and to reach an agreement with all the relevant parties over a potential rescue deal.
If the proposed CVA cannot be agreed to and does not go through then there is potential that Toys R Us in the UK will collapse into administration.
On the other side of the Atlantic, Toys R Us is facing similar financial difficulties within its North American operations and recently filed formal bankruptcy protection proceedings in the US.
Negotiations are set to continue in the UK ahead of a vote on the company’s CVA plans this week, with a 75 per cent majority of creditors required to see a deal secured and the turnaround plan put into action.