Dawson Disappointed Over Unsuccessful PPF Talks
20 July 2012 (PLANSPONSOREurope.com) - Dawson International has expressed its disappointment that talks with the Pension Protection Fund (PPF) and the Pensions Regulator (tPR) over its proposed entry of its UK defined benefit plans into the PPF have proven unsuccessful with both bodies rejecting all offers made by the textiles business.
In a statement today the firm says it will now enter into discussions with the plans' Trustees and tPR to determine what its options are, adding if no agreement can be reached which is based on the continued trading of the group's businesses, and a binding schedule of contributions is served on the company which the company is unable to fulfil in the specified timescale, the firm’s Board would have no alternative but to consider appointing administrators for all or part of the group. While the timescale for this process is unclear, the firm says it will update shareholders as soon as further information becomes available.
The firm says it has striven for many years to reduce the deficits on the plans, making contributions of £2.2m in the last financial year alone. Despite these efforts, the deficits have widened, mainly due to changes in actuarial assumptions, and associated costs have risen significantly. The company has been involved in protracted discussions with the Trustees of the Plans, incurring over £1.4m of advisory fees in the past four years. After exhausting all other possibilities, the firm concluded in May 2012 that there was no alternative but to seek entry of the plans into the PPF. This would mean the PPF assuming responsibility for the plans in return for a cash payment, loan note and equity stake in the company. The firm says its Board understood that the proposal would have had the support of certain key shareholders who may have been prepared to inject fresh capital to offer the PPF immediate cash rather than a loan note. However, the statement adds that despite the company committing every available financial resource to maximising the offer, providing terms that were significantly better than the insolvency value as determined by independent external experts, the PPF and tPR have deemed the proposal unacceptable.
The PPF\tPR have stated that the compensation offered by the company was insufficient in comparison to the size of the deficit the PPF was being asked to assume.
Dawson International’s board says it cannot understand this decision, adding the PPF and tPR have rejected the “best possible” offer from the company which provided not only significantly more cash than is likely to be recovered through an administration process but also the opportunity for further value to be realised through part-ownership of a profitable continuing business. The firm adds the consequence is likely to be that the plans ultimately enter the PPF, with the PPF receiving lower compensation, and furthermore approximately 200 jobs are put at risk.
David Bolton, Chairman of Dawson International, said: "We have worked tirelessly over the past four years in order to achieve the best possible outcome for our pension scheme members whilst also enabling our 140-year-old UK business to continue to develop and invest.
“We believe that our proposal provided significantly better, guaranteed returns than insolvency and we are surprised by the PPF's decision. In the event of administration, while we would expect that a new owner would be found quickly, there remains a real risk that a successful and profitable UK heritage business will suffer from a period of uncertainty.
“It should be a matter of wider concern that the UK pensions reporting and regulatory environment can produce such an evidently unsatisfactory outcome."