TPR: Companies must engage early with regulator on CVAs

In a report about its Arcadia Group intervention, published on Thursday, the watchdog stated that it has “statutory objectives to protect member benefits and the Pension Protection Fund, and where a restructuring is happening in a company or group that sponsors defined benefit schemes”, it will want to understand the impact on those pension funds.

Employers and their advisers should engage with TPR early in the process and provide the regulator with full information, so it can work with the PPF to assess the impact of the CVA, it stated.

“This may help inform the PPF’s vote in the CVA. Seeking to agree a proposal with other creditors before approaching us and the PPF may leave the employer in a position where it does not have sufficient room to manoeuvre to get the PPF’s support,” the watchdog said.

In the case of Arcadia, the company and its advisers engaged with TPR from an early stage, it noted.

The regulator said that circumstances in which CVAs are proposed may be similar to those where a regulated apportionment arrangement may otherwise be sought, and that it will access the restructuring proposal in line with its principles on RAAs.

In 2019, Tina Green, Arcadia Group’s majority shareholder, agreed to inject an additional £100m into the Arcadia pension funds to help plug the shortfall, with funding of £25m a year for the next three years plus an additional £25m contribution.

She also agreed to invest £50m of equity into Arcadia, in addition to the £50m of funding provided earlier this year, and to fund the cost of the amended rental-reduction terms within the CVA proposals announced in June.

During this process, TPR analysed whether the insolvency of the employer would be otherwise inevitable: if the scheme might receive more from an insolvency, or if a better outcome might be attained for the scheme by other means, including the use of its powers.