House of Fraser's defined benefit (DB) scheme has not been automatically placed into Pension Protection Fund (PPF) assessment despite restructuring plans, PP can confirm.
The ailing retailer today (7 June) today confirmed it is seeking shareholder support for proposals to close more than half of its 59 stores across the UK as part of a company voluntary arrangement (CVA).
As the scheme is in a ‘last man standing' arrangement, and House of Fraser is not the ‘last man', this means the proposal has not triggered PPF assessment unlike similar situations at Mothercare and Toys R Us within the last 12 months.
It also means the scheme itself will be entitled to a vote on the CVA. At Mothercare and Toys R Us, the automatic triggering of PPF assessment meant the lifeboat fund exercised the voting rights.
The CVA will be voted on at a meeting on 22 June, at which the DB scheme - the House of Fraser Scheme, the Beatties Scheme and the Jenners Scheme - will be entitled to a vote. The retailer requires approval from 75% of creditors.
A spokesperson for Dalriada Trustees, which was appointed to the scheme by the company last month, said the scheme's trustees were supportive of the CVA.
"We can confirm that the trustee has been proactively engaged in discussions with the House of Fraser group regarding the CVA proposals and House of Fraser's business transformation plans," they said. "The trustee is there to act in members' best interests and has been receiving professional advice and engaging with The Pensions Regulator throughout the process.
"The CVAs, if approved, do not seek to compromise or reduce House of Fraser's obligations to the pension scheme. The trustee is supportive of the fact that the CVAs provide for House of Fraser to continue to honour its obligations to the pension scheme."
Lincoln Pensions director Luke Hartley said the pension scheme would be crucial to approving the deal, which is also seeking rent cuts across its stores, including those which will remain open.
"Another day, another historic retailer using a CVA to try to rid itself of problematic stores and costly leases," he said. "A pension scheme is a key decision-maker in any CVA.
"While companies can seek to ‘cram down' creditors such as landlords, ultimately the pension scheme could be the kingmaker here. Any deal which improves the group's prospects and sees the pension scheme emerge unscathed, while other creditors take the hit, can only be good for members."
A study by Moore Stephens, published in November 2016, found that one in 10 companies securing approval for CVAs then fell into administration within three years.
At its most recent triennial valuation for which information is public, dated 31 December 2013, the House of Fraser section had an actuarial deficit of £71.3m, while the Beatties and Jenners section had a surplus of £11.5m.
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