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Debenhams schemes enter PPF assessment, cash increase agreed

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The defined benefit pension schemes of UK retailer Debenhams have entered into the country’s lifeboat fund’s assessment period after the company proposed to restructure its store portfolio.

The high street retailer was placed into administration earlier this month and today proposed two “Company Voluntary Arrangements” (CVA) that would see around 50 of its 166 stores closed, starting with up to 22 store closures in 2020.

The company said that, as part of the overall restructuring and turnaround plan, it and its lenders had agreed it would increase cash contributions to the pension schemes by £9m annually from September this year to 2023. This was as part of a revised funding agreement reached with the trustees.

A spokesperson for the Pension Protection Fund (PPF) confirmed that the company’s pension schemes had entered into PPF assessment as a result of the CVA proposal.

“In the event the CVA is passed, we would expect the schemes to then exit PPF assessment,” she added.

“We have been working closely with the Pensions Regulator, the company and trustees of the scheme to ensure the best outcome for members and PPF levy payers.

“Members can be reassured that the PPF is there to protect them if needed.”

Debenhams’ schemes had assets worth £1.1bn (€1.3bn) at the end of September 2018, according to company accounts, and a funding surplus of £156m.

Dan Mindel, managing director at Lincoln Pensions, said: “As with other recent high profile cases, the initial financial restructuring is an important first step in stabilising the business but the need to address the underlying operational challenges of these companies remains the key issue for the future of the schemes.”

To become effective, each CVA proposal has to be approved by 75% or more in value of the creditors voting at a creditors’ meeting – to be held on 9 May – and by more than 50% of the total value of the unconnected creditors.

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