On the go: The chair of the Work and Pensions Select Committee has condemned the Pensions Regulator’s finding that restructured publisher Johnston Press did not use a ‘pre-pack’ insolvency to avoid its pension obligations.
Frank Field criticised the watchdog’s decision to drop the probe, after it said there was no evidence to suggest the insolvency was avoidable or that the administration was planned to circumvent payment of deficit repair contributions.
Johnston Press and Johnston Publishing, the sponsoring employers of the Johnston Press Pension Plan, went into administration on November 17 2018, along with most of the rest of the companies in the Johnston Press Group.
Administrators then sold the business and assets to a company owned by the group’s bondholders, JPI Media Group, under a ‘pre-pack’ arrangement.
Mr Field said: “This nasty little trick of ‘pre-packs’ being used to bundle up a company bankruptcy and quietly jettison the pension scheme into the Pension Protection Fund has long been on TPR’s radar. The PPF raised the alarm straight off about the Johnston Press pre-pack, not least because its finances were in decent enough shape: they had some cash to put into the pension.
“How TPR has decided there’s no avoidance case to answer is beyond baffling – and there’s no real indication in their report, nothing to explain away our and PPF’s deep concerns. We hear over and over of TPR’s new ‘clearer, quicker, tougher’ approach: what on earth happened this time?”
In a letter to the regulator last year, the committee said it appreciated the difficulty of refinancing the group’s £220m bond debt due for repayment in June 2019, but stated: “There was no indication that the business was cash flow insolvent and unable to meet its current debts as they fell due – indeed this has subsequently been confirmed by the administrators.”
Mr Field added: “There is little in TPR’s report to explain why it has taken the different view – that there is no evidence the company was avoiding its pension obligations – and the case renews concerns about TPR’s engagement with schemes while contributions are still being made.”
The Johnston Press scheme has 5,000 members, split roughly 50:50 between pensioners and deferred members, with a deficit of £305m on a section 75 basis – which by law the PPF has to claim back. The actual cost to the PPF is expected to be £109m because of lower benefits for PPF members than in the existing plan.
The Pensions Regulator said in its report into Johnston Press: “Pre-pack insolvencies are a legitimate means of preserving jobs and value in a business which could otherwise end up in liquidation.”
“Where pre-pack insolvencies result in the removal of sponsor support from a defined benefit scheme, the parties to the transaction should expect us to investigate whether there are grounds for us to take anti-avoidance action, particularly in circumstances where there is an association between the new owners and the previous owners or other stakeholders.”
