Sir Philip Green’s Arcadia eyes pension contribution cuts

2018
Arcadia CVA
// Sir Philip Green’s Arcadia wants to halve the amount it pays into its pension pot every year
// It reportedly plans to slash the £50m it contributes annually to £25m
// Arcadia’s pension deficit stands at around £550m on a conventional funding basis and £750m on a full buyout basis
// The proposed cuts would be part of an imminent restructure of the retail empire

Arcadia Group has proposed to halve the annual contributions it makes to its pensions scheme as part of an imminent restructure of the business.

According to Sky News, Sir Philip Green’s retail empire is looking to slash the £50 million annual funding it provides to the pensions pot to £25 million.

The proposal was reportedly made in recent weeks during discussions between Arcadia’s advisers, its pension trustees and The Pensions Regulator.

Sky News also said that employees faced seeing their benefits reduced through a planned switch from RPI to the lower CPI inflation measure of calculating annual payment uplifts – which could reportedly eliminate “a couple of hundred million pounds” from the company’s pension deficit calculation.

The proposals could also plunge Green into a fresh pensions row, two years after he was forced to plug up to £363 million to the pension scheme of thousands of former BHS workers following months of discussions and controversy.

Arcadia’s pension scheme has thousands of members and is understood to currently have deficit of about £550 million on a conventional funding basis and £750 million on a full buyout basis.

The proposal to cut its contributions form part of an imminent financial restructuring that could entail the closure of dozens of stores and hundreds of job cuts across the company.

Green and Arcadia chief executive Ian Grabiner have reportedly been eyeing up a potential CVA to close up to 67 stores and cut rents by an average of 30 per cent on the rest.

The 67 earmarked stores reportedly have an annual rent total of £11 million.

However, Arcadia faces uphill struggle amid growing criticism of CVAs by property owners – and now with pension trustees and The Pensions Regulator.

CVAs also need approval from Arcadia’s creditors – including landlords and the Pension Protection Fund.

Last week it was revealed that Arcadia was mulling the idea of offering shares of up to 20 per cent to landlords in a bid to gain their support for the restructuring plans.

Arcadia had already drafted property advisers GCW for representation during discussions with landlords across its store estate, as well as Deloitte to carry out a review of the business.

It’s rumoured that Arcadia could launch its restructuring scheme as early as this month.

Green’s retail empire consists of around 570 shops in the UK, plus concessions in department stores, and employs around 18,000.

Arcadia Group is the parent company of Topshop and Topman, Dorothy Perkins, Miss Selfridge, Burton, Evans and Wallis.

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