Events of 2006-2011 are likely to cast a long shadow over Johnston Press’s plans to restructure its finances, specifically its pension scheme obligations.
Older readers will recall that in 2006 Polestar’s pension scheme, which at the time was a £141m liability on the group’s balance sheet, was separated from the print group in a controversial move that was supposed to see Polestar pay £45m into the scheme over the subsequent 12 years.
Five years later Polestar was sold in a pre-pack deal to private equity firm Sun Capital Partners that involved jettisoning responsibility for the remainder of that promised £45m (Polestar wasn’t even up to date with the schedule, having deferred payment) in exchange for a one-off £3.6m payment.
The hived-off scheme was subsequently wound up, and ended up in the Pension Protection Fund. Some 4,500 Polestar pensioners lost out on their expected pension payouts as a result, and the Pensions Regulator ended up with a considerable amount of egg on face for allowing the separation to happen in the first place.
The Johnston Press situation is different, because if it is approved its scheme will go directly into the PPF. The quantum of the payment that will be required from hedge fund GoldenTree to make this happen will be noteworthy, as will any payment schedule. The triennial review of the Johnston scheme was put on hold last year pending the outcome of its financial review, but at the last count it had a deficit of £47.2m, and scheme assets of £561.4m.
The thinking behind the move is that pensioners will be better off than if Johnston Press were to go bust under the weight of its considerable liabilities, including £220m of high-yield bonds due next year. The group itself has stated that it “cannot support this level of debt and pension commitments over the longer term.”
However, for companies that have, and continue to pay their pension dues, it must all leave a sour taste.