A “more robust anti-avoidance regime”, as recommended by the Work and Pensions Committee, could have led to a better financial settlement for the Monarch scheme, Work and Pensions Committee chair Frank Field has said.

Writing to the Pension Protection Fund’s chief executive Alan Rubenstein, Field questioned The Pensions Regulator and the PPF’s ability to negotiate a “minimally acceptable dowry” for the scheme as a result of the Mantegazzas concerns regarding TPR’s moral hazard powers being deployed.

Field commented that the initial offer made by the Mantegazzas and the final £30m settlement “betray inadequacies in TPR’s armoury of anti-avoidance powers”.

The chair added that: “Compared to the hundreds of millions of pounds of debt they were being released from, the deal was a good one for the Mantegazzas only.”

Concluding the letter, Field asked Rubenstein to detail what the opening bid for the financial settlement from the Mantegazza’s was, how many different proposals were made before the RAA was agreed and why the PPF settled on the amount it did.

In response to Field’s letter, Rubenstein noted that although the deal with Monarch took place in a short period of time, (five weeks), due to the firm being on the “brink of insolvency”, the PPF ensured that the final settlement was in line with its published restructuring principles.

“I think the fact that we rejected a number of proposals we deemed to be unsatisfactory clearly demonstrates that we are always prepared to walk away if we do not believe the uplift offered over a straight insolvency is adequate,” Rubenstein said.

Rubenstein outlined that the initial bid made by the Mantegazzas, that was less that £10m, was rejected. It also refused to accept the following offer of £20m in cash with 10 per cent anti-embarrassment equity. He said that this offer was still inadequate for the pension scheme when compared to how much other creditors were being asked to forgive in relation to money owed to them.

The final settlement with the Mantegazzas comprised of £30m in upfront cash, £7.5m in secured loan notes and 10 per cent anti-embarrassment equity.

“Given that the recovery to the Monarch scheme in the event of insolvency would have been zero, we and ultimately our levy payers are £30m better off as a result of the upfront cash payment we negotiated. Depending on the outcome of the administration process, we may in time receive additional recoveries from our secured loan notes negotiated as part the RAA,” Rubenstein told Field.

It was added in Rubenstein’s letter that in this case, TPR believed that there were “no grounds for the use of their powers” and provided clearance for the transaction as a result.

“It is difficult to speculate on whether a different anti-avoidance regime would have resulted in a different outcome,” Rubenstein concluded.

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