The Pension Protection Fund (PPF) has admitted is has concerns with the pre-pack administration sale of Johnston Press, stating it does not understand why there was an “apparent rush” to complete the pre-pack.
In a series of letters published by the Work and Pensions Committee today, 6 December, numerous details surrounding the sale were revealed. It has led committee chair, Frank Field, to pile fresh criticism on The Pensions Regulator.
“It doesn't take a genius to work out that a company that dumps its pensions liabilities just days before it has to put £800,000 into the pension fund might be up to no good. It’s clear that the PPF, which is left to foot the bill, has serious doubts about this pre-pack deal. The Pensions Regulator has promised to be quicker and tougher — now would be a good time to start,” he said.
The newspaper publisher filed for administration in November, and was subsequently sold through a pre-pack deal, with its pension scheme now in PPF assessment. The scheme’s deficit on a PPF basis is around £109m, and £305m on a buyout basis.
PPF chief executive, Oliver Morley, told Field that the PPF does not have issues with pre-pack administrations in general, but does have concerns in cases where the process is misused to "dump" liabilities, including pension schemes.
In the case of Johnston Press, Morley said that the PPF had been led to believe that "the group actually had more than adequate cash reserves" — including to pay the pension contribution of £800,000 due on 18 November, just two days after administrators were appointed. It has asked for evidence of a "burning platform" need for a swift pre-pack deal—and has seen none. It does not "understand why there was an apparent rush to complete the pre-pack administration".
The PPF has referred the case to the regulator, and TPR has told the committee that its "enquiries are ongoing" and that it is still considering "whether further investigation of the rationale for the pre-pack may be warranted".
In response, a TPR spokesperson said: “Where we suspect that the pre-pack process has been misused, to the detriment of the pension scheme, we have strong anti-avoidance powers to attain redress on behalf of members where it can be shown that specific legal tests are met. We are currently looking closely at the circumstances of the Johnston Press pre-pack deal including timing of the company sale. These enquiries are ongoing and we continue to work closely with the scheme trustee and the PPF.”
TPR added that pre-packs can happen at short notice, which is why TPR’s powers to act quickly to investigate and take tough action after an event are important. However, it said it is also vital that it fully considers the facts of each case.
“It is not possible to launch an investigation into a pre-pack that has not taken place. Regulating the process leading to a pre-pack is a matter for the other agencies. Our role is to focus on a pre-pack’s impact on an employer’s pension scheme. We do not have the power to stop a pre-pack taking place (as there is no requirement for either us or the PPF to pre approve it). The Department for Business, Energy and Industrial Strategy (BEIS) is currently looking at pre-packs as part of its wider look at matters of corporate governance.”