Field calls for swift action from TPR on Johnston pre-pack

Johnston Press filed for administration in November and was subsequently sold through a pre-pack deal, leaving the Pension Protection Fund to pick up the bill for its pension scheme, which has a deficit of around £109m on a PPF basis and £305m on a buyout basis.

It doesn't take a genius to work out that a company that dumps its pensions liabilities just days before it has to put £800,000 into the pension fund might be up to no good. It’s clear that the PPF, which is left to foot the bill, has serious doubts about this pre-pack deal.

Frank Field, Work and Pensions Committee

In a series of letters between Frank Field, the PPF, Pre Pack Pool and the regulator, worrying details about the circumstances of the pre-pack deal have been brought to light. 

In the case of Johnston Press, the PPF said that it had been led to believe that "the group actually had more than adequate cash reserves," including to pay the pension contribution of £800,000 due on November 18, just two days after administrators were appointed.

It has asked for evidence of a "burning platform" need for a swift pre-pack deal, and has seen none. It does not "understand why there was an apparent rush to complete the pre-pack administration". 

Field said: "It doesn't take a genius to work out that a company that dumps its pensions liabilities just days before it has to put £800,000 into the pension fund might be up to no good. It’s clear that the PPF, which is left to foot the bill, has serious doubts about this pre-pack deal.”

Regulator considering circumstances of Johnston Press deal

The PPF has referred the case to the regulator. TPR has told the select committee that its "enquiries are ongoing" and that it is still considering "whether further investigation of the rationale for the pre-pack may be warranted".

Field added: “The Pensions Regulator has promised to be quicker and tougher – now would be a good time to start."

Responding to the Work and Pensions Select Committee’s call for swift action, a spokesperson for the regulator said: “Where we suspect that the pre-pack process has been misused, to the detriment of the pension scheme, we have strong anti-avoidance powers to attain redress on behalf of members where it can be shown that specific legal tests are met.”

“We are currently looking closely at the circumstances of the Johnston Press pre-pack deal, including timing of the company sale. These enquiries are ongoing and we continue to work closely with the scheme trustee and the PPF.”

The spokesperson added that pre-packs can happen at short notice, which is why the regulator’s powers to act quickly to investigate and take tough action after an event are important, but noted that it is also vital that the watchdog fully considers the facts of each case. “It is not possible to launch an investigation into a pre-pack that has not taken place.”

The spokesperson added: “Regulating the process leading to a pre-pack is a matter for the other agencies. Our role is to focus on a pre-pack’s impact on an employer’s pension scheme. We do not have the power to stop a pre-pack taking place (as there is no requirement for either us or the PPF to pre approve it). The Department for Business, Energy and Industrial Strategy (BEIS) is currently looking at pre-packs as part of its wider look at matters of corporate governance.”

Timing 'unconnected' to £800,000 contribution

A spokesperson for Johnston Press said the decision to place Johnston Press into administration was taken by three independent judges, in three separate legal jurisdictions of the UK, who each approved the directors' application for administration.

“The directors took legal and financial advice and concluded that there was no alternative courses of action available to the company. Although the business was trading profitably, on an operating basis, the conclusion of the Formal Sales Process demonstrated that there was no longer a reasonable prospect of the company finding a way to repay the £220m bond that fell due for repayment on June 1 2019 or otherwise avoiding an insolvency process. This meant that the directors came under a legal obligation to petition the relevant courts on an urgent basis.

“The timing was wholly unconnected to the £800,000 monthly pension contribution the company was due to make. The Group has made payments of £55m in respect of the scheme since early 2014. The PPF and the Pensions Regulator were informed of the proposed timing for these applications in advance.”

The spokesperson concluded: “As outlined in the SIP16 report prepared for creditors by the administrators, a total of 63 parties were contacted during the Formal Sales Process conducted by the company leading to six offers being tabled, including one for the business as a whole. Yet no viable solvent offers were received, with no parties willing to acquire the pension obligations.”

A spokesperson for Alix Partners, the administrators, said: “We have worked closely with all relevant pension bodies for several months leading up to the administration and will continue to do so as required.”