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| Monarch collapse: MP calls for change in law to protect pension schemes | Monarch collapse: MP calls for change in law to protect pension schemes |
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| MP Frank Field, the chair of the work and pensions committee, has called for a change in the law following reports that the owners of collapsed airline Monarch may end up with a profit while the company’s pensioners lose out. | |
| Britain’s longest-surviving airline brand was placed into administration earlier this month, leaving 110,000 customers abroad and 750,000 future bookings cancelled. Private equity group Greybull Capital, which bought a majority stake in the airline three years ago, was said to have lost £250m in the collapse after pumping that much into the business. It bought 90% of Monarch in 2014 for a token £1, with the pension scheme owning the remaining 10%. | Britain’s longest-surviving airline brand was placed into administration earlier this month, leaving 110,000 customers abroad and 750,000 future bookings cancelled. Private equity group Greybull Capital, which bought a majority stake in the airline three years ago, was said to have lost £250m in the collapse after pumping that much into the business. It bought 90% of Monarch in 2014 for a token £1, with the pension scheme owning the remaining 10%. |
| But the Financial Times reported that Greybull’s owners, the French brothers Marc and Nathaniel Meyohas, only put around £85m in cash into the business, with other financing coming from elsewhere, including from US aircraft maker Boeing, and a dowry from the Swiss Mantegazza family who sold the business. | But the Financial Times reported that Greybull’s owners, the French brothers Marc and Nathaniel Meyohas, only put around £85m in cash into the business, with other financing coming from elsewhere, including from US aircraft maker Boeing, and a dowry from the Swiss Mantegazza family who sold the business. |
| On top of that, the way that Greybull’s secured loans to Monarch were structured means it has first call on the airline’s assets, according the report. These are said to include around £30m of cash, take-off and landing slots which could be worth some £60m, and an engineering business which is not in administration. | On top of that, the way that Greybull’s secured loans to Monarch were structured means it has first call on the airline’s assets, according the report. These are said to include around £30m of cash, take-off and landing slots which could be worth some £60m, and an engineering business which is not in administration. |
| Other creditors, including Monarch’s pension scheme, which is owed £7.5m, are likely to be left with nothing, the report said. As part of the Greybull takeover, the pension scheme, which had a deficit of around £158m at the time, was separated from the company. Pension regulators agreed to the move because they were satisfied Monarch would have gone bust within 12 months without the deal. | Other creditors, including Monarch’s pension scheme, which is owed £7.5m, are likely to be left with nothing, the report said. As part of the Greybull takeover, the pension scheme, which had a deficit of around £158m at the time, was separated from the company. Pension regulators agreed to the move because they were satisfied Monarch would have gone bust within 12 months without the deal. |
| Field, whose committee led an investigation into the collapse of BHS after its sale for £1 to former bankrupt Dominic Chappell, has now written to the chief executive of the Pension Protection Fund, Alan Rubenstein, questioning the status of the pension fund. He wants to know whether the PPF has received any payments yet from Monarch relating to the £7.5m, and where the pension fund sits in the order of creditor preference. | Field, whose committee led an investigation into the collapse of BHS after its sale for £1 to former bankrupt Dominic Chappell, has now written to the chief executive of the Pension Protection Fund, Alan Rubenstein, questioning the status of the pension fund. He wants to know whether the PPF has received any payments yet from Monarch relating to the £7.5m, and where the pension fund sits in the order of creditor preference. |
| Responding to the report, Field said: “How can it be that, once again, mega rich individuals could walk away from a collapsed company with a bumper profit while ordinary people pick up the bill? | Responding to the report, Field said: “How can it be that, once again, mega rich individuals could walk away from a collapsed company with a bumper profit while ordinary people pick up the bill? |
| “This massively supports the case for the law to change, to robustly protect pension schemes.” | “This massively supports the case for the law to change, to robustly protect pension schemes.” |
| Malcolm Weir, director of restructuring and insolvency at the PPF, said it was in the process of responding to Field’s letter but added that, without the PPF’s protection in 2014, Monarch pension scheme members would have faced significant losses. | |
| He said: “The expected recovery for the pension scheme if Monarch had gone bust in November 2014 was £0. The £30m in cash secured for the scheme by the restructuring of Monarch was much more than the scheme would have otherwise received. The restructuring met the PPF’s published tests. | |
| “In addition to the cash, the scheme also took debt in the business and a 10% equity stake. These were taken on the basis that if the business were to become successful again there would be a further return. Recent events have shown that, while we hope to receive some further recovery in respect of our debt, sadly Monarch did not return to being a successful business. Despite this, we believe that the protections we negotiated in November 2014 to ensure our debt and equity could not be superseded or watered down have operated as intended. | |
| “By agreeing to the restructuring in November 2014 the PPF is better off than if the company had simply been left to fail at that time.” | |
| A Greybull spokesman said it had no comment at the moment but the company was working with the administrators to do its best to mitigate the impact of the collapse. It has previously said there was no other rescue bid on the table in 2014, and its involvement had kept the airline flying and its staff in work for three years: “Greybull provided significant capital to Monarch and did not receive dividends, interest or any repayments of its loans.” | A Greybull spokesman said it had no comment at the moment but the company was working with the administrators to do its best to mitigate the impact of the collapse. It has previously said there was no other rescue bid on the table in 2014, and its involvement had kept the airline flying and its staff in work for three years: “Greybull provided significant capital to Monarch and did not receive dividends, interest or any repayments of its loans.” |
| It said the details of its negotiations with Boeing remained confidential. | It said the details of its negotiations with Boeing remained confidential. |
| It blamed Monarch’s collapse on “factors outside of its control”, including terrorism and the collapse of the pound after the Brexit vote. Two of its biggest markets, in Egypt and Tunisia, were closed to tourists after terrorist attacks. | It blamed Monarch’s collapse on “factors outside of its control”, including terrorism and the collapse of the pound after the Brexit vote. Two of its biggest markets, in Egypt and Tunisia, were closed to tourists after terrorist attacks. |
| The airline’s demise meant the Civil Aviation Authority was forced to mount the UK’s biggest peacetime repatriation to bring home stranded passengers, at a cost of around £60m to the government. | The airline’s demise meant the Civil Aviation Authority was forced to mount the UK’s biggest peacetime repatriation to bring home stranded passengers, at a cost of around £60m to the government. |