The Pensions Regulator has dismissed a proposal made by Arcadia to plug its defined benefit schemes deficit with an additional £100m as part of a restructuring plan.
Sir Philip Green's (pictured) retailer plans a company voluntary arrangement which will see the closure of 23 of its 566 stores in the UK and Ireland, with the loss of 520 jobs.
For the CVA to be implemented, it is necessary that 75 per cent of creditors must vote in favour of the plan, with the Pension Protection Fund representing the pension scheme’s interests.
The ailing retailer has two final salary plans with a combined deficit in 2018 of £537m on technical provisions, or £727m on a buy-out basis (the amount needed for an insurer to take on the liabilities).
A TPR spokesperson said that the regulator remains "in discussions with the company and the trustees to understand the impact of the CVA proposals on the scheme and to ensure the strongest possible outcome is achieved".
He said: "We note from the CVA announcement that the shareholder is prepared to put an additional £100m into the scheme over a number of years to bridge a shortfall in deficit recovery contributions.
"However, we do not consider the proposals are sufficient to ensure that members of the scheme are adequately protected."
According to FTAdviser’s sister newspaper the Financial Times, Arcadia’s restructuring plan included Tina Green — Sir Philip’s wife and the ultimate owner of Arcadia — offering landlords a 20 per cent share of any proceeds if the parent of the Topshop chain is eventually sold.
As part of the plan, Lady Green will inject an additional £50m of equity into the business, on top of the £50m she has already loaned to Arcadia.
There will also be a £40m fund to compensate compromised creditors, who will vote on the proposals on June 5.
Sir Philip’s former retailer BHS went into administration in April 2016, leading to an investigation by TPR after workers’ pension funds were found to be at risk.
An independent pension scheme for 19,000 former BHS workers was set up after a £363m settlement was reached with Sir Philip.
The new scheme would pay members the same starting pension that they were originally promised by BHS, with greater ongoing benefits than they would have received from the Pension Protection Fund.
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