It has been revealed that the trustee of the House of Fraser defined benefit pension scheme is a “key decision maker” on the retailer’s proposed company voluntary arrangement (CVA).
The struggling department store chain revealed its plans for a CVA to investors yesterday, 6 June 2018, in which it plans to close 31 stores by early 2019, including its flagship store on Oxford Street in London.
In other recent high profile cases, such as Toys R Us, the Pension Protection Fund had a significant part to play in the vote to approve the CVA. However, in the case of House of Fraser, as the two DB schemes are ‘last man standing’ schemes, the CVA has not automatically triggered a PPF assessment period. As a result, it is the scheme's trustee, and not the PPF, which has the vote on the CVA.
Dalriada trustees, which look after the scheme, confirmed the trustee has been “proactively engaged in discussions” with the House of Fraser group regarding the CVA proposals.
“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.”
Commenting on the situation, Lincoln Pensions director Luke Hartley noted that a pension scheme is a “key decision maker” in any CVA due to their voting rights reflecting their buyout claim, which could be several hundred million pounds in the case of House of Fraser.
“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, whilst other creditors take the hit, can only be good for members.”