The Pension Protection Fund is in “constructive discussions” with Carpetright about the company’s proposed Company Voluntary Arrangement (CVA).
The retailer announced today, 12 April, that following a comprehensive review of the property portfolio, it has earmarked 92 sites for closure in the short term under the CVA proposal, with hopes of reducing the rent for the remaining 113 sites.
The retailer would also like to raise £60m in capital, with the intention of using the proceeds to fund its ongoing strategy, reduce its debt and cover the costs associated with the CVA. Carpetright has been struggling for several months, which it said was down to “weak consumer confidence”. In its post-Christmas trading update, for the 11 weeks to 13 January, it revealed total group sales were down 2.3 per cent.
Unlike other British high street brands such as BHS and Toys R Us, which had substantial pension deficits when they proposed restructuring arrangements, Carpetright’s most recent information about its defined benefit scheme reveals a deficit of £200,000. The retailer said it had reduced its defined benefit pension deficit by £3m, from £3.2m to £200,000, due to actuarial gains of £2.6m and a contribution of £400,000. As at 28 October, the scheme had assets of £30.1m and liabilities of £30.3m.
Commenting on the CVA, a PPF spokesperson said: “We are in constructive discussions with the company and their advisers about the CVA proposals and their implications for pension schemes associated with the company. Members can be reassured that the PPF is there to protect them.”
Following the announcement of the CVA proposal, British Property Federation (BFP) assistant director of real estate policy, Stephanie Pollitt, has said landlords and shareholders voting on the CVA “need to take into consideration the impact on their investors, including those protecting pensioners’ savings”.
"These situations are never easy as landlords need to take into consideration the impact on their investors, including those protecting pensioners' savings, as they vote on the CVA proposal. Carpetright and Deloitte, however, have demonstrated best practice, constructively engaging with the BPF early in the process and ensuring landlords' interests have been properly taken into account. Ultimately, it will be for individual landlords to decide how they will vote on the CVA, but the proposal has sought to find a solution that works for all parties."
Carpetright CEO Wilf Walsh said the proposals were “tough but necessary actions” which will enable it to address the burden of a legacy UK property estate. "Completion of the CVA and equity financing will enable us to establish an appropriately-sized estate of modernised stores, on economic rents, complemented with a compelling online offer, enabling Carpetright to address the competitive threat from a position of strength. We will remain in close contact with all colleagues to keep them fully informed as we move through this process,” he added.
The Pensions Regulator declined to comment on the situation.