A potential pre-pack sale of Pulse Flexible Packaging, which fell into administration earlier this month, has been blocked due to the company’s pension scheme being a shareholder and secured creditor of the business.
The Bury-headquartered consumer goods packaging manufacturer, which also has a production facility in Saffron Walden, was placed into administration on 3 April after suffering operational challenges that led to an additional funding requirement that could not be met.
Jonny Marston and Howard Smith from KPMG were appointed administrators of the firm, which recorded a turnover of £57.9m and gross profit of £8.8m for the year ended 31 March 2016. However, it had administration expenses of £5.7m and other charges that contributed to overall profit for the period of £1.7m.
Production at both sites ceased immediately, with the majority of the company’s 350 staff sent home while administrators assessed whether trade could resume in the immediate term. No redundancies were reported at the time.
Last week, Sky News reported that an unnamed prospective buyer had drawn up plans to shed the firm’s retirement scheme obligations.
However, the company’s pension scheme had become a secured creditor and shareholder of the business in May 2014, at the same time that Pulse was established following a management buyout (MBO) of the UK operations of Printpack Enterprises Ltd from US parent Printpack Inc.
The Pension Protection Fund (PPF) reportedly backed the stance adopted by the firm’s pension scheme and is now expected to take on its 700 members. The scheme’s buyout deficit is thought to be around £80m.
A PPF spokesperson 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.”
The spokesperson said the PPF protects millions of people in the UK who belong to defined benefit pension schemes in case their employer, or former employer, fails and the scheme can no longer afford to pay their promised pension.
On pre-packs, the PPF spokesperson added: “Each case is different and unique but the PPF has a duty to maximise its return from insolvent employers to mitigate the call on its levy payers and applies all relevant processes to ensure this happens.
“In recent years we have been educating insolvency practitioners on the need to engage before any pre-pack insolvency. A pre-pack insolvency may be entirely appropriate in the circumstances but this needs to be demonstrated.
“The number has dropped significantly in the last few years and, while some cases have caused us concern, we do not believe there is an issue of widespread abuse of this mechanism. We have strong controls in place to take action if a scheme comes to the PPF through a pre-pack insolvency without prior engagement or where we have concerns.
“In such circumstances we would alert the Pensions Regulator, who have a range of regulatory powers available to them, and can seek to protect the interests of our levy payers by appointing an independent liquidator.”
PrintWeek has contacted Pulse Flexible Packaging’s administrators who have reported no other movement so far on either the current staff situation or the search for a buyer. Calls to the company itself are directed to a closed switchboard.