Bernard Matthews sale was ‘carefully crafted’
The Work and Pensions Committee has released a report which describes the acquisition of Bernard Matthews as having been “carefully crafted to enable secured creditors and controllers of Bernard Matthews to extract maximum cash from the company and dump the pension scheme and other liabilities.”
The report, written by Professor Prem Sikka of the University of Essex, examines the pre-pack arrangements for Bernard Matthews Ltd.
Sikka notes that the sale proceeds of the company will be used to make a full payment of £46.4 million to lenders Wells Fardo Capital Finance (UK) and PNC Financial Services UK Ltd. Rutland Partners, which has already received £34 million, is likely to receive a total of £39 million.
He adds that conversely, the Bernard Matthews Pension Fund, which recorded a published deficit of £17.5 million that is likely to have grown to £20 million, is likely to receive 1p in the pound at best.
“No attention has been paid to the hardship caused to retired and existing employees,” Sikka reported. “It is all too easy for companies, their director and shareholders to extract cash and dump pension obligations to employees, leaving the Pension Protection Fund (PPF) or taxpayers to foot the bill and effectively boost returns to corporate elites.”
According to Sikka, unsecured creditors at set to lose the most following the acquisition.
“Due to so-called business friendly laws, there has been no discussion with unsecured creditors who stand to lose the most. Indeed, there is little chance they can do anything to secure their position,” he said. “This will have an adverse effect on supply chain creditors, many local businesses (farmers, plumbers, electricians, garages, local services), and of course their pension schemes.
“As the details of business sale remain confidential it is not possible to know whether the outcome is the best or the fairest for all stakeholders.”
As part of his report Sikka recommended a change to insolvency laws.
“In the interest of fairness to creditors, especially unsecured creditors, there should be at least a 14 day notice to raise objections to the proposed business/asset sale and the outcomes of the proposed. The administrator should not be in a position to present a fait accompli to creditors.”
Following the publication of the report, Frank Field MP, chair of the Work and Pensions Committee, commented: “What looks likely to be an increase in these pre-pack arrangements, which act to the huge detriment of pensioners, and bump up still further the levies on good employers through increase Pension Protection Fund contributions, is no doubt an issue the Committee will want to look at early on Parliament’s return.
“We will expect that the Government will soon publish a new Pensions Bill, and this may offer the Committee an opportunity of proposing further reforms so as to protect better the position of pensioners in circumstances similar to Bernard Matthews Ltd.”
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