The future of Toys R Us UK is now up in the air after the Pension Protection Fund (PPF) indicated it would vote against the retailer’s proposed restructure plan.
It comes after the UK division of the US toy chain was ordered to inject £9 million into its pensions scheme by the PPF in order for it to support the company voluntary agreement (CVA).
The vote on the CVA is scheduled for Thursday, whereby it will need the approval from a 75 per cent majority of creditors.
The PPF, which is representing members of Toys R Us’ 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 making around 500 staff redundant.
If the CVA does not go through on Thursday, Toys R Us UK could fall into administration its 3200 staff would be at risk of losing their jobs.
However, PPF head of team Malcolm Weir provided some hope after confirming they were still in dialogue with Toys R Us, and that they could “amend” their vote if suitable assurances were provided.
“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,” Weir said.
“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.”
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.