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Toys ‘R’ Us Pension Members Win Better Restructuring Deal

Britain’s Pension Protection Fund has fought for improved terms for the toy retailer’s pension plan members as its U.K. unit navigates insolvency.

  • By Joe McGrath

The U.K.’s £30 billion ($40 billion) Pension Protection Fund has pushed Toys “R” Us to make a £9.8 million cash injection into the beleaguered retailer’s defined benefit retirement plan under a revised restructuring agreement.

The PPF, which provides a safety net to plan members when their employers go bust, has taken a tough stance in the restructuring negotiations between creditors and Toys “R” Us, the Wayne, New Jersey-based retailer that filed for bankruptcy protection in the U.S. in September. The pension plan provided by the insolvent U.K. unit of Toy “R” Us has a deficit of more than £25 million, according to a person familiar with the matter.

Under the revised agreement, the U.K. unit will make a £3.8 million pension payment into the scheme in 2018 plus £6 million over the following two years, according to Malcolm Weir, director of restructuring and insolvency at the PPF. That’s up from a total £9 million cash injection under the previous restructuring proposal.

Weir said the revised deficit-recovery plan has been shortened to 10 years, with additional support from the U.S.-based toy retailer to shore up the pension funding shortfall. The agreement was approved by about 98 percent of creditors, the person familiar with the matter said, adding that 26 of the 105 Toy “R” US stores in the U.K. will be closed under the deal.

With the PPF’s support of the revised agreement secured, the U.K. unit of Toys “R” Us is now set to be placed into a so-called company voluntary arrangement, or CVA, which gives troubled businesses a chance to pay creditors over a longer period of time or on renegotiated terms. To succeed, a CVA needs to be approved by parties who hold at least 75 percent of the debt.

“We have been working closely with Toys “R” Us and their advisers in the run up to the CVA vote,” Weir said in a statement Thursday. “We can confirm that an agreement has now been reached and we will now be voting in favor of the proposals at the CVA meeting today.”

[II Deep Dive: PPF to Vote Against Toys R Us Restructure]

Trustees of the Toys “R” Us pension scheme have expressed their appreciation of the favorable impact the CVA will have on the retailer’s employees under the new deal.

“We are pleased that agreement has been reached for the PPF to vote for the CVA,” Graham Barker, chair of the trustees and Tom Lukic, a director with Dalriada Trustees who was appointed to act as professional trustee to the Toy “R” Us pension plan, said in a joint statement. “We will be writing to update all scheme members as soon as the result of the vote is known.”

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