Toys R Us has proposed a compromise deal on funding its pension as it tries to win the support of the Pension Protection Fund (PPF) for a restructure that could stave off administration and the loss of 3,200 jobs.
The ailing retailer is in last-ditch talks with the industry-funded pensions lifeboat, which has said it will not vote in support of an insolvency plan at a creditors’ meeting on Thursday morning without more cash for the Toys R Us pension scheme.
Toys R Us is expected to go into administration if the company voluntary insolvency plan, which involves the closure of at least 26 loss-making stores as well as reducing the size of others, does not go ahead.
The PPF wants £9m be paid into the retailers’ pension fund over the coming months. Toys R Us has said it cannot meet that demand but has offered to pay off the fund’s deficit within 10 years, five years earlier than stipulated in its current plan, as first reported by Sky News.
The scheme has 600 members and a deficit of about £30m under the PPF assessment, or as much as £93m on the basis of a buy-out by an insurer.
Trustees for the pension fund have brought in PricewaterhouseCoopers to assess the financial position of the company to ensure the pension scheme would not be weakened by the CVA. There are fears the process could lead to an even bigger claim on the PPF and its levy payers in future if the business does not survive long-term.
Toys R Us’s American parent company filed for Chapter 11, the US version of administration, in September after running up $5bn (£3.7bn) of debts. On Wednesday, it revealed a $623m net loss in the three months to the end of October as sales at established stores slid 4.5%.
While talks were expected to continue into Thursday morning, the industry-funded pensions lifeboat on Tuesday filed its proxy voting intention alongside dozens of other creditors who will vote on a Toys R Us planned company voluntary arrangement (CVA) insolvency procedure on Thursday.
It is understood that creditors are able to change their vote at the meeting if Toys R Us and the PPF are able to find a suitable compromise.