(Press Association) Toys R Us in the UK looks to have staved off the threat of administration after a key creditor to the retailer agreed to a restructuring plan that will secure around 2,500 jobs.
The beleaguered retailer’s proposal for a company voluntary arrangement (CVA) is expected to be voted through on Thursday after it obtained the backing of the Pension Protection Fund (PPF).
However, while the CVA will allow Toys R Us to stay afloat, at least 26 loss-making UK stores will shut as part of the restructure, meaning up to 800 jobs are set to be lost.
Malcolm Weir, the PPF’s director of restructuring and insolvency, said: “We have been working closely with Toys R Us and their advisers in the run-up to the CVA vote. We can confirm that an agreement has now been reached and we will now be voting in favour of the proposals at the CVA meeting today.”
Hanging in the balance
The fate of all 3,200 Toys R Us jobs was hanging in the balance ahead of the ballot, with administrators waiting in the wings had the CVA been rejected.
The Pension Protection Fund (PPF) had earlier refused to back the retailer’s rescue plans, but concessions from the company, including an offer to reduce its deficit recovery plan to 10 years from 15 years, meant the deal received the PPF’s blessing.
In total, Toys R Us has agreed to pay £9.8m into the pension plan, made up of £3.8m in 2018, with a further £6m promised over 2019 and 2020.
“This offer goes a long way to addressing the PPF’s concerns and in de-risking the pension scheme, offering greater protection for the current and retired members in the pension scheme.
“The PPF will always seek assurances on behalf of the pension schemes and pension scheme members it protects, as well as consider the interests of other UK companies that pay the Pension Protection Fund levy.”
Stores too 'big and expensive'
Other creditors include the firm’s landlords, who will stomach rent cuts as part of the restructuring.
The retailer, which is owned by US-based Toys R Us, trades from 84 stores in the UK and has 21 concessions.
Toys R Us has said that trading has suffered as its warehouse-style stores, opened in the 1980s and 1990s, have proved “too big and expensive to run”, while it has also struggled to keep up with online competitors.
The announcement comes just months after the US-based retailer filed for bankruptcy protection in the US and Canada.