UK pensions lifeboat blocks Toys R Us survival plan

The Pension Protection Fund (PPF) has confirmed it intends to block a proposed restructuring of Toys R Us, pushing the retailer closer to collapse unless a deal can be struck within two days.

The future of the the UK arm of Toys R Us and 3,200 jobs hang in the balance as the retailer has said it cannot meet the industry-funded pensions lifeboat’s demand that £9m in extra funds be put into the scheme in two months’ time.

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 and talks are ongoing between the fund and Toys R Us to find a suitable compromise. But the PPF has indicated it currently plans to block the CVA.

If the CVA, which involves the closure of at least 26 loss-making stores, fails, sources close to the company have said the retailer is likely to fall into administration with the potential closure of all 84 permanent stores and about 20 more pop-ups.

Malcolm Weir, director of restructuring and insolvency at the PPF, said: “Since the company lodged the CVA proposals we have spent significant time and effort, with the help of PwC, assessing the current and future financial position of the company to ensure the pension scheme would not be weakened by the CVA, leading to an even bigger claim on the PPF and its levy payers further down the line.

“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.

“We remain in dialogue with the company and their advisers and we are able to amend our vote if suitable assurances provided.”

Toys R Us’s UK business does not have the resources to put £9m into its pension fund. Its 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.