The future of Toys R Us in the UK has been plunged into doubt after the Pensions Protection Fund (PPF) said it would block the retailer’s proposed restructuring plan.
The pensions lifeboat has confirmed that it intends to vote against Toys R Us’ proposed company voluntary arrangement (CVA), which includes the closure of 26 stores and the loss of around 500 jobs.
Its decision could put the retailer — with 100 stores and 3,200 employees in the UK — at risk of collapse unless a deal can be reached in the next two days.
Earlier this week, the PPF requested that a £9m contribution be made by Toys R Us into its pension funds so as to secure its support. But the retailer has indicated that it does not have the resources to meet its demands.
It is understood that talks are ongoing between the fund and Toys R Us, aimed at finding a suitable compromise before creditors vote on the proposed CVA at a meeting on Thursday.
If the CVA fails, sources close to the company told Sky News that the retailer’s UK business is likely to fall into administration with the potential closure of all 84 of its permanent stores and about 20 pop-ups.
PPF director of restructuring and insolvency Malcolm Weir said: “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.
“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.
“We remain in dialogue with the company and their advisers and we are able to amend our vote if suitable assurances provided.”
The PPF said Toys R Us’ scheme has 600 members and a deficit of £30m under the PPF assessment and as much as £93m on the basis of a buy-out by an insurer.
Frank Field, chair of Parliament’s work and pensions committee, said the stewardship of the company has been “disgraceful”.
The MP has expressed concerns about the write off of £584.5m in loans owed by a Toys R Us firm based in the British Virgin Islands, and the pay awarded to the retailer’s former boss Roger Mclaughlan.