Toys R Us UK has made a last-ditch pension deal to help save the business from collapse, according to reports.
The UK arm of the US-based toy retailer put forward a new proposal that aims to eliminate the pension shortfall during a meeting with the Pension Protection Fund (PPF) on Tuesday, Sky News has reported.
The deal would reportedly hasten Toys R Us’ deficit recovery plan from 15 years to 10 years and offer a larger payment than the £1.6 million originally planned for its pension scheme in January and March.
The news comes after the PPF indicated it would vote against the retailer’s restructure proposals under the company voluntary agreement (CVA), effectively throwing the future of 3200 Toys R Us UK staff into uncertainty.
However, PPF head of team Malcolm Weir provided some hope after confirming they could “amend” their vote if suitable assurances were provided.
Prior to this, the PPF demanded Toys R Us makes a £9 million into its pensions scheme to secure three years’ worth of funding upfront for its defined salary staff pension scheme, which has a shortfall of between £25 million and £30 million.
It is understood that Toys R Us does not have enough cash to meet the PPF’s demands.
The final vote on Toys R Us UK’s CVA is scheduled today, whereby it will need the approval from a 75 per cent majority of creditors.
The PPF, which is representing members of the retailer’s pensions scheme, holds around 20 per cent of the creditors’ votes eligible to be cast in the CVA. This means it could carry a decisive vote.
Drafted by PwC, the proposed CVA includes plans to close 26 of the toy retailer’s 100-plus UK stores and make around 500 staff redundant.
The PPF’s tough stance on Toys R Us comes after the Pensions Regulator faced heavy criticism for failing to act to better protect pensioners during the BHS collapse.
Toys R Us UK put up its CVA plans after admitting its trading had suffered, with its warehouse-style stores now “too big and expensive to run”, while struggling to keep up with online competitors.
In September, Toys R Us’ US division filed for Chapter 11 bankruptcy, having amassed £3.6 billion in debt.
Toys R Us UK is also thought to have made losses in seven out of the last eight years.