Yahoo Finance McColl’s pension trustees demand intervention by Kwarteng
Kwasi Kwarteng has been urged by McColl's pension trustees to intervene in the takeover of the failed convenience chain over fears that a rescue deal will hit thousands of staff in retirement.
The Business Secretary has been asked to ensure that the pension scheme’s 2,200 members are not left out of pocket in the wake of a looming takeover of McColl’s by the billionaire Issa brothers, who own Asda.
The Issa’s company, EG Group, is this weekend waiting for insolvency courts to rubber-stamp the deal following an audacious swoop hours after McColl’s fell into administration on Friday, putting 16,000 jobs at risk.
EG Group’s intervention came after a solvent takeover by Morrisons collapsed on Friday morning.
Judges are considering an acquisition of McColl’s “business and assets” through a controversial pre-pack administration process.
This would theoretically allow the billionaires and co-owners TDR Capital to avoid paying creditors and sever ties with the company's pension scheme. It is not known what the Issas plan to do if they are successful.
Members of McColl’s two retirement funds - which have a combined deficit of £16m on a buyout basis - are at risk of being jettisoned into the Pension Protection Fund if no alternative arrangements are made, and they will be slapped with a 10pc cut to benefits if not at pensionable age.
The prospective dumping of McColl’s pension scheme will thrust the treatment of retirees back into the limelight for the first time since Sir Philip Green decided to walk away from a £360m black hole in department store BHS’s pension fund in 2015. The tycoon subsequently reached a deal with trustees to support pensioners.
Rachel Croft, chairman of trustees at McColl’s, wrote to Mr Kwarteng and Thérèse Coffey, the Work and Pensions Secretary, late on Friday urging them to intervene.
In the letter, she said: “Breaking the link between the schemes and the sponsor company, by way of a pre-pack administration, would represent a serious breach of the pension promises made to staff who have served the business loyally over many years, and risks causing the schemes to enter into the Pension Protection Fund, with a potential reduction in benefits.
“You will be well aware of the impact on current and former employees of McColl’s if a buyer does not respect the promises made to scheme members, and we would therefore encourage you to use your influence to ensure that this does not happen.”
EG Group intends to safeguard McColl’s jobs and sites and has pledged to pay over-18s more than £10-an-hour, significantly more than the minimum wage of £6.83. The company has repeatedly insisted that it seeks to be a good corporate citizen with a positive impact on society.
Speculation was this weekend continuing over why McColl’s lenders - which are owed a collective £165m and include HSBC, Barclays and state-backed NatWest - rejected Morrisons’ rescue.
Morrisons’ offer to roll the debt over into the supermarket chain is believed to have been less appetising than the EG Group plan that will see senior lenders repaid in full.
There were also rumours that hedge funds had bought part of the debt at a discount of up to 30pc, meaning that they were motivated to be repaid now rather than convert their loans to Morrisons debt.
EG Group declined to comment.
