Defined Benefit 

Arcadia restructuring gets green light

Arcadia restructuring gets green light

UK pension authorities have given the green light to Arcadia's restructuring plan, as the ailing retailer has agreed to provide an extra £25m to its pensions schemes, bringing the additional security up to £210m.

The Pension Protection Fund will today (June 5) vote in favour of the company voluntary arrangement Arcadia has proposed, which will see the closure of 23 of its 566 stores in the UK and Ireland, and the loss of 520 jobs.

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).

As part of the CVA, the retailer is proposing to decrease the annual contributions made to the schemes from £50m to £25m, for three years, "with security over certain assets being granted in order to provide support to the schemes".

The additional security is made up of certain property assets, which could be sold to fund the pension scheme in a crisis.

Lady Green - Sir Philip Green’s wife and the ultimate owner of Arcadia — has offered to bridge the shortfall with funding of £25m per year for the next three years, plus an additional £25m contribution, resulting in total payments of £100m.

A spokesperson for The Pensions Regulator noted that the agreement on the additional security followed extensive discussions with the company, shareholders, the trustees of the pension schemes, the PPF and advisers.

He said: "Given this enhanced level of support, we now consider the updated CVA proposals are sufficient because they provide better protection for scheme members in these difficult circumstances.

"We recognise that the best support for any pension scheme is a trading employer and we feel the CVA proposals now provide the right balance between security for the pension schemes and the chance of sustainability for the company."

The Trustees of the Arcadia Pension Schemes noted that "the total package of support announced provides the best outcome achievable for the schemes”.

Oliver Morley, chief executive of the PPF, noted that despite the pensions lifeboat positive vote on the CVA – where it is the large creditor – other parties will “also need to agree the terms for it to be successful”.

He said: “We therefore want to reassure pension scheme members of the continued protection the PPF gives them.”

Retail companies have been resorting more and more to CVAs, which involve negotiating with creditors to lessen their claims in order to allow the company to run on. For these arrangements to be approved, it is necessary that 75 per cent of creditors voting must vote in favour of it.

Ian Grabiner, chief executive of Arcadia Group, noted that the retailed is hoping the landlords and other creditors will follow PPF’s suit, and the company can get “back on a strong footing in all the markets where we trade”.

maria.espadinha@ft.com

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