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| Pension Protection Fund may take stake of at least 33% in BHS | Pension Protection Fund may take stake of at least 33% in BHS |
| (35 minutes later) | |
| The state-backed Pension Protection Fund (PPF) is poised to take a stake of at least 33% in BHS as the struggling department store chain faces a complex battle to restructure its retirement scheme and secure its survival. | The state-backed Pension Protection Fund (PPF) is poised to take a stake of at least 33% in BHS as the struggling department store chain faces a complex battle to restructure its retirement scheme and secure its survival. |
| The retailer’s future effectively lies in the hands of pension regulators and its former owner, Sir Philip Green, who could provide funds to fill the pension deficit of £571m. BHS faces months of wrangling over the deficit, despite creditors voting through a vital company voluntary arrangement (CVA) this week. | The retailer’s future effectively lies in the hands of pension regulators and its former owner, Sir Philip Green, who could provide funds to fill the pension deficit of £571m. BHS faces months of wrangling over the deficit, despite creditors voting through a vital company voluntary arrangement (CVA) this week. |
| In return for the BHS pension scheme entering the state-backed lifeboat, the PPF will take a stake of at least 33% and wants cash to be contributed towards the deficit. | In return for the BHS pension scheme entering the state-backed lifeboat, the PPF will take a stake of at least 33% and wants cash to be contributed towards the deficit. |
| Related: BHS pension: why the regulator wants Sir Philip Green to contribute more | |
| The PPF was created under the 2004 Pensions Act to provide protection if funds become insolvent and is paid for from a levy on employers. It has warned BHS that it could push the company into administration if it does not stump up support for its pension scheme by the end of September. | The PPF was created under the 2004 Pensions Act to provide protection if funds become insolvent and is paid for from a levy on employers. It has warned BHS that it could push the company into administration if it does not stump up support for its pension scheme by the end of September. |
| A source close to the PPF said it was prepared to take that step: “If the circumstances are right, then yes they will do it. We now have a window of opportunity. Hopefully it will be used wisely.” | A source close to the PPF said it was prepared to take that step: “If the circumstances are right, then yes they will do it. We now have a window of opportunity. Hopefully it will be used wisely.” |
| The PPF can crystallise the pension deficit, creating “section 75 debts” that BHS would be obliged to pay. However, the PPF is likely to accept a compromise deal – whereby BHS or a third party stumps up cash to fill some of the deficit. | The PPF can crystallise the pension deficit, creating “section 75 debts” that BHS would be obliged to pay. However, the PPF is likely to accept a compromise deal – whereby BHS or a third party stumps up cash to fill some of the deficit. |
| Given the strain on BHS, which has been loss-making for several years, it is unlikely to be able to meet this demand. However, Green and his family, the retailer’s former owners, could provide the funds. | Given the strain on BHS, which has been loss-making for several years, it is unlikely to be able to meet this demand. However, Green and his family, the retailer’s former owners, could provide the funds. |
| The pensions regulator is understood to be exploring whether Taveta, the investment firm held by Lady Tina Green, Green’s wife, should be forced to put cash into the pension scheme. Green is reported to have offered £80m, £40m in cash and £40m as a loan secured against BHS’s assets. | The pensions regulator is understood to be exploring whether Taveta, the investment firm held by Lady Tina Green, Green’s wife, should be forced to put cash into the pension scheme. Green is reported to have offered £80m, £40m in cash and £40m as a loan secured against BHS’s assets. |
| The pensions consultant John Ralfe said: “It looks like Taveta, the former owners, now has a six-month window to offer a large chunk of money to plug the BHS pension deficit. | The pensions consultant John Ralfe said: “It looks like Taveta, the former owners, now has a six-month window to offer a large chunk of money to plug the BHS pension deficit. |
| “If this doesn’t happen it seems inevitable that BHS will fall into administration and the pensions regulator will start the process of making a legal claim through the courts.” | “If this doesn’t happen it seems inevitable that BHS will fall into administration and the pensions regulator will start the process of making a legal claim through the courts.” |
| The agreement that involves the PPF taking control of a pension scheme from an employer is known as a regulated apportionment arrangement. It must be approved by the regulator as well as the PPF. | |
| The BHS pension scheme has already entered an assessment scheme with the PPF, which could last up to two years. It will be one of the largest pension schemes in Britain to ever enter the protection fund. | The BHS pension scheme has already entered an assessment scheme with the PPF, which could last up to two years. It will be one of the largest pension schemes in Britain to ever enter the protection fund. |
| The situation is complex because typically the PPF would be dealing with a company that has gone bust, rather than one that is still trading. | The situation is complex because typically the PPF would be dealing with a company that has gone bust, rather than one that is still trading. |
| Related: BHS chief asks public for second chance as retailer wins crucial vote | |
| A spokesperson from the regulator said: “Where an employer which sponsors a pension scheme is subject to a qualifying insolvency event, we may be involved in discussions with the parties involved. However, we will only comment on individual schemes and/or companies if and when it is appropriate to do so. | A spokesperson from the regulator said: “Where an employer which sponsors a pension scheme is subject to a qualifying insolvency event, we may be involved in discussions with the parties involved. However, we will only comment on individual schemes and/or companies if and when it is appropriate to do so. |
| “We are able to confirm that we are aware of the situation but have no further comment to make at this time.” | “We are able to confirm that we are aware of the situation but have no further comment to make at this time.” |
| Whatever the outcome, pensions for the 20,000 members of the BHS scheme will be protected. Under the PPF, however, benefits would be cut by 10% for most existing staff, with senior management enduring a larger reduction. | Whatever the outcome, pensions for the 20,000 members of the BHS scheme will be protected. Under the PPF, however, benefits would be cut by 10% for most existing staff, with senior management enduring a larger reduction. |
| BHS considered creating a new pension scheme as an alternative to entering the PPF last year, according to sources. This scheme would have offered smaller cuts to pensions than entering the PPF but still saved the company money compared with the existing scheme. The proposal was drawn up under a programme dubbed internally as Project Vera, which examined options for the scheme. | BHS considered creating a new pension scheme as an alternative to entering the PPF last year, according to sources. This scheme would have offered smaller cuts to pensions than entering the PPF but still saved the company money compared with the existing scheme. The proposal was drawn up under a programme dubbed internally as Project Vera, which examined options for the scheme. |
| However, the likelihood of this proposal getting passed by the regulator was slim. BHS is thought to have shelved the idea and is focused on entering the PPF. | However, the likelihood of this proposal getting passed by the regulator was slim. BHS is thought to have shelved the idea and is focused on entering the PPF. |
| The retailer won a stay of execution this week when creditors approved its survival plan, a CVA securing the short-term future of BHS’s 10,000 staff. | The retailer won a stay of execution this week when creditors approved its survival plan, a CVA securing the short-term future of BHS’s 10,000 staff. |
| Related: BHS battles to stay on the high street | |
| The CVA involves landlords accepting sharp cuts to the rent on 87 of BHS’s 164 shops. Up to 40 of these could close in the next few months if a deal on the size of the rent reduction cannot be reached with property owners. | The CVA involves landlords accepting sharp cuts to the rent on 87 of BHS’s 164 shops. Up to 40 of these could close in the next few months if a deal on the size of the rent reduction cannot be reached with property owners. |
| BHS also needs to raise £100m to fund its operations and a turnaround plan. It is close to agreeing a £60m loan with Gordon Brothers, the restructuring firm, and raising another £30m though subletting part of its flagship shop on Oxford Street in London. | BHS also needs to raise £100m to fund its operations and a turnaround plan. It is close to agreeing a £60m loan with Gordon Brothers, the restructuring firm, and raising another £30m though subletting part of its flagship shop on Oxford Street in London. |
| BHS is owned by Retail Acquisitions, a consortium of little-known financiers, lawyers and accountants who bought the business from Green for £1 last year. | BHS is owned by Retail Acquisitions, a consortium of little-known financiers, lawyers and accountants who bought the business from Green for £1 last year. |
| New documents filed at Companies House reveal that 90% of Retail Acquisitions is owned by Dominic Chappell, a two-time bankrupt. Another 5% is owned by Eddie Parladorio, a lawyer, with 2.5% held by Stephen Bourne, an accountant, and another 2.5% held by lawyer Mark Tasker. | New documents filed at Companies House reveal that 90% of Retail Acquisitions is owned by Dominic Chappell, a two-time bankrupt. Another 5% is owned by Eddie Parladorio, a lawyer, with 2.5% held by Stephen Bourne, an accountant, and another 2.5% held by lawyer Mark Tasker. |