Playing with fire: last-minute deal saves Toys R Us from collapse | Nils Pratley

Toys R Us is saved for the nation – or, rather, three-quarters of the UK end of the debt-ridden and ailing US company lives to fight another day. This is excellent news for the 2,000 employees in the UK who will keep their jobs, but little consolation for the 800 whose posts will be axed when 26 stores close next year.

The pension deal that allowed Toys R Us to escape administration in the UK is a fudge. It is untidy and imperfect – but probably the best that could be negotiated against a tight timetable.

At least the Pension Protection Fund (PPF), the industry lifeboat, didn’t try to over-sell the deal. The company’s offer “goes a long way” to addressing concerns, it said, choosing its words carefully. It means that not all its worries were answered.

You bet. The PPF wanted £9m to go into Toys R Us’ defined-benefit fund up-front, meaning in the first few months of 2018. Instead, it has got £2.2m up-front and £1.6m next October, to be followed by two payments of £3m in 2019 and 2020. You can call that £9.8m but the extended timetable is a significant concession given that Toys R Us’ long-term survival in the UK can hardly been viewed as certain.

Some companies prosper after so-called company voluntary arrangements (CVA); others are back on their knees within months. In the case of Toys R Us, the stores look to be 20 years behind the times and Amazon is still on the prowl.

But the PPF was surely right to take the deal. The minimum requirement here was to ensure that, in most circumstances, the position of Toys R Us’s pension fund won’t deteriorate. That concern has probably been met. Even if the company’s self-help trading plan fails after six months, the pension fund will have more money in it. And, if Toys R Us recovers, the PPF has secured advantages – a corporate promise to de-risk the scheme and close the £30m deficit over a shortened timetable of 10 years. Both pledges are worth having.

A pragmatic compromise is not a surprise. The PPF arrives on the scene when crisis has arrived, so its ability to play hardball is limited. For better results in future, the Pensions Regulator needs more powers to intervene earlier. Behind Thursday’s mini-drama at Toys R Us sits the unexamined tale of the write-off of a £584m inter-company loan between the UK business and the US parent. The regulator must get to the bottom of that story urgently.

Developers should calm down over a few quid

Housebuilders were never going to like Sajid Javid’s “crackdown on unfair leasehold practices”, but they brought it on themselves. The system, as the communities secretary says, is “feudal” but it has been given a thoroughly modern spin by 21st century financing. All those onerous ground rents on long leaseholds have become an opportunity to convert cashflows into assets to be flogged to third parties, with the interests of leaseholders too often disregarded.

Javid’s measures are commendably strong. Developers will be banned from selling new houses on a leasehold basis, except where necessary, for example in cases of shared ownership. And ground rents on new long leases will be set at zero.

That second policy sent shares in McCarthy & Stone, a specialist in retirement homes, down 9%. Chief executive Clive Fenton was hopping mad, warning the proposal “will result in a disruption of housing supply”.

Up to a point, one can see why he’s upset. Retirement “villages” come with long-term maintenance agreements, so the ground rent could be considered akin to type of a service charge. But Fenton should calm down. His chances of securing an exception from the new rules are surely slim since Javid could just tell McCarthy to describe its charges properly and make them transparent.

Such a switch might cost the company a few quid, but that’s not the government’s look-out. Either way, in the current housing climate, semi-threatening to build fewer homes is a poor way to ask for a favour – and probably ensures a thumbs-down.

A £265m embarrassment for Skanska

Another financial bubble? A year ago Swedish group Skanska sold a 40% stake in Connect Plus, which maintains the M25 motorway, for £265m. On Thursday, Balfour Beatty sold a 12.5% stake to a couple of infrastructure funds for £103m, implying its current 40% holding is worth £330m.

So a motorway maintenance contract – which is all Connect Plus really is – has risen in value by 25% in 14 months. It’s either an infrastructure bubble, or Skanska did a terrible deal.