Toys R Us has reached a £9.8m agreement with the Pension Protection Fund (PPF) which will clear its pension deficit and stop it falling into administration, saving 3,200 jobs.

In a statement, the PPF confirmed a deal has been reached in which Toys R Us will pay £3.8m in 2018 and a further £6m over 2019 and 2020, in what rounds of a tense week for the toy company.

In addition, Toys R Us has shortened its deficit recovery plan to 10 years and will seek additional support from its US parent company.

Speaking of the deal, PPF director of restructuring and insolvency, Malcolm Weir, said: “We have been working closely with Toys ‘R’ Us and their advisers in the run up to the Company Voluntary Agreement (CVA) vote. We can confirm that an agreement has now been reached and we will now be voting in favour of the proposals at the CVA meeting today."

Weir also confirmed that the trustees will have greater powers if any of the above conditions are not met.

It will come as pleasant news to many employees in the week before Christmas, and the creditors are set to vote on the final proposal today (Thursday), and PPF support, which counts for 20 per cent, will go a long way to the 75 per cent needed from all of the creditors.

Weir added: “This offer goes a long way to addressing the PPF’s concerns and in de-risking the pension scheme, offering greater protection for the current and retired members in the pension scheme.

“The PPF will always seek assurances on behalf of the pension schemes and pension scheme members it protects, as well as consider the interests of other UK companies that pay the PPF levy.”

Talks continued ever since the PPF said it was not willing to accept Toys R Us’ initial proposal, or CVA on Tuesday, having not received “sufficient assurances” from the firm.

The original £9m of upfront payments suggested by the PPF, would have been enough to bring forward the next three years of deficit payments.

According to the PPF, the Toys R Us’ scheme currently has around 600 members, a PPF deficit of £30m and a buyout deficit of £93m, meaning if the scheme was transferred to the PPF in its current form, there would be a cost to its levypayers.

Under current proposals, 500 jobs would face the cut, but a failure to agree on the proposed CVA would put the future of 2,700 employees in doubt.

Toys R Us chair of the trustees, Graham Barker, said: “Whilst the trustee board very much appreciate the impact of the CVA on a number of employees and stores, we are pleased that agreement has been reached for the PPF to vote for the CVA.

“We will be writing to update all scheme members as soon as the result of the vote is known.”

The deal marks the end of a turbulent week for the fund, on Monday, the Work and Committee chair Frank Field labelled Toys R Us’ response to its investigation into the firms pension scheme as “disingenuous”, claiming that trustees at the pensions regulator had been “left in the dark”.

Replying to the committee's questions, Toys R Us vice president operations Graham Barker said that the write-off has no impact on the scheme because it occurred in a different part of the company, “a number of layers above the employer responsible for the DB scheme, Toys R Us Limited”.

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