Toys R Us in the UK is struggling to get support for the company’s restructure plan, with the retailer on the brink of administration.
Immediate problems are arising for Toys R Us, one of the UK’s biggest LEGO stockists. The government’s Pension Protection Fund (PPF) is withholding support for the restructure plan that would see Toys R Us continue to trade through Christmas, and begin closing stores in the Spring of 2018. Around 3,200 jobs are at risk.
The Guardian reports that there is a pension deficit of over £18.4 million, so the PPF requires Toys R Us to put money into the pension fund:
The PPF, the industry-funded, state-backed safety net, demanded that the troubled retailer pump about £9m into the ailing Toys R Us UK pension fund.
This is in order to gain the PPF’s support for the retailer’s planned company voluntary arrangement (CVA) procedure, which involves the closure of at least 26 loss-making stores. That deal would lead to the loss of up to 800 jobs.
The insolvency procedure automatically pushes Toys R Us’s pension fund into assessment by the PPF, giving it a key vote at the meeting and the potential to block the process.
It could be as soon as this weekend that Toys R Us falls into administration, as reportedly the company is not able to put the required £9 million into the pension fund.
The also-struggling US Toys R Us is not able to provide any support:
The group’s US parent is also unable to lend its UK subsidiary the cash under the terms of its court-led bankruptcy protection. The parent company filed for Chapter 11, the US version of administration, in September after running up $5bn (£3.7bn) of debts.
The PPF is seeking to reassure employees that all pensions accrued by Toys R Us employees are protected.