UK politicians have accused the former owners of a high-profile meat business of rejecting a deal that would have protected its pension scheme in order to maximise profits from a sale.
Rutland Partners, a private equity group, sold the Bernard Matthews business last year to Boparan Private Office (BPO).
The sale took the form of a “pre-pack” administration, as Bernard Matthews was declared insolvent. It allowed BPO to purchase the assets of the company and take on 1,800 employees, but without taking on the company’s debts – including the defined benefit pension scheme.
This has entered the Pension Protection Fund’s (PPF) assessment period with an estimated £75m shortfall on a full buyout basis.
In a statement published by the Work and Pensions Committee – a group of politicians from the UK’s lower house – last week, Rutland was accused of “lining their own pockets” by committee chair Frank Field.
The committee published letters from administrators Deloitte and BPO explaining their positions. BPO said it offered to buy Bernard Matthews in July 2016, before it entered administration, including taking on the pension scheme. This offer was rejected.
The committee said: “Bernard Matthews was instead placed into pre-pack administration, a process which placed Rutland Partners ahead of the pension scheme in the hierarchy of creditors. This arrangement delivered a much-improved financial outcome for Rutland Partners but drastically reduced the amount recoverable by the pension scheme – to potentially less than [1%].”
However, Rutland Partners denied the committee’s accusations. In a statement on the company’s website, Rutland said: “At all times Rutland sought to protect the future of the business, those it employed, and including those who had built up defined benefit pensions through their service.
“Bernard Matthews’ ongoing financial difficulties were longstanding and predated Rutland’s ownership and involvement in the business. It is regrettable for all stakeholders that we were ultimately unable to rescue the business despite over three years of hard work and investment.”
On the July 2016 BPO offer, Rutland said advisers to Bernard Matthews and its “key stakeholders” did not see the offer as a “solvent solution for the business”.
PPF helps block pre-pack deal
Separately, the PPF helped the trustees of a packaging firm’s pension fund block a similar pre-pack deal in favour of a full administration process.
The Pulse Flexible Packaging pension scheme had invested in secured debt issued by the sponsoring company, which allowed trustees to block the pre-pack arrangement. Such a move would have allowed the company to walk away from its obligations towards the pension scheme.
IPE understands the PPF supported the trustees’ stance, strengthening their position. The PPF’s involvement in an insolvency is aimed at maximising the money and assets a scheme can take from the event, in order to limit its impact on the PPF’s funding position or even avoid the scheme coming into the lifeboat fund altogether.
A spokesperson for the PPF said: “We are aware that Pulse Flexible Packaging Limited has gone into administration. As a result, we expect that the pension scheme will enter the PPF assessment period, and members can be reassured that we are there to protect them.”
Scotland mulls public-backed private equity fund
Scottish Enterprise, a development agency backed by the Scottish government, is considering the launch of a new local investment fund.
It has tendered a contract for a consultant to assess the viability of the idea.
Scottish Enterprise said it intended to create a private equity secondaries fund, seeded with assets from the Scottish Investment Bank. The viability assessment “will consider the advantages, disadvantages, issues and factors that would need to be considered”, the tender document said.
The consultant would be tasked with assessing investor appetite, identifying managers, estimating costs, and assessing other risks involved in setting up such a fund.