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Toys R Us faces crunch vote over UK rescue plan Toys R Us agrees deal to give £9.8m to pension fund
(about 5 hours later)
Toys R Us's future in the UK is hanging in the balance ahead of a key vote by creditors later on Thursday over whether to back the firm's rescue plan. Toys R Us has agreed a deal with the Pension Protection Fund (PPF) to inject £9.8m into its pension scheme.
The Pension Protection Fund (PPF) - which wants the toy retailer to put £9m into its struggling pension fund - has said it will vote against the plan. The move is a big step to rescuing the retailer, where 3,200 UK jobs hang in the balance.
Failure to agree a deal could put all its 3,200 staff at risk of redundancy. The PPF said the payment was composed of £3.8m in 2018, with a further £6m promised over 2019 and 2020.
However, reports suggest Toys R Us has put forward new proposals to try to reach a last-minute deal with the PPF. Toys R Us's UK staff pension scheme has a deficit of more than £25m, and the PPF rejected the company's earlier offer to inject £9m.
The PPF - whose duty is to pensioners and not the company - wants money upfront to secure funding for Toys R Us's staff pension scheme, which has a deficit of more than £25m. The retailer's creditors have been meeting on Thursday to negotiate a rescue plan, which hinged on a resolution of the pension deficit.
Toys R Us, which has 100 stores and outlets in the UK, has put forward a company voluntary arrangement (CVA), which is a step short of going into administration. Creditors' talks were twice suspended, and were due to re-start in the afternoon.
Under its CVA plans, Toys R Us is proposing to close at least 26 loss-making UK stores, a move that would put up to 800 jobs at risk and mean rent cuts for landlords. Toys R Us, which has 100 stores and outlets in the UK, put forward a company voluntary arrangement (CVA), which is a step short of going into administration.
Under its CVA plans, Toys R Us has proposed to close at least 26 loss-making UK stores, a move that would put up to 800 jobs at risk and mean rent cuts for landlords.
The company sells largely from warehouse-style stores at the edge of towns, but says these are now "too big and expensive to run". It is also finding it hard to compete against online toy retailers.The company sells largely from warehouse-style stores at the edge of towns, but says these are now "too big and expensive to run". It is also finding it hard to compete against online toy retailers.
Toys R Us factfileToys R Us factfile
Julie Palmer retail expert BTG Advisory, part of the accountancy firm Begbies Traynor, told the BBC the CVA could just be putting off the inevitable: "It's a little bit of a moral dilemma... is the CVA going to make the position of employees worse or is it going to make it better?
"It might make it better in the short term if it preserves jobs, but if all that's going to do is postpone the pain and potentially increase the deficit at the pension fund then that might long term make their position worse."
Earlier this week, Toys R Us had reassured shoppers seeking last-minute presents by saying: "There will be no disruption for customers shopping through the Christmas and New Year period."Earlier this week, Toys R Us had reassured shoppers seeking last-minute presents by saying: "There will be no disruption for customers shopping through the Christmas and New Year period."
Toy's R Us's parent company in the US is in formal bankruptcy protection proceedings. Recent reports suggest it is considering closing between 100 and 200 stores in America.Toy's R Us's parent company in the US is in formal bankruptcy protection proceedings. Recent reports suggest it is considering closing between 100 and 200 stores in America.