The investigation was launched in November after Johnston Press – publisher of newspapers including i, The Scotsman and The Yorkshire Post, was bought by JPIMedia, a newly-formed company controlled by a consortium of Johnston's debt investors led by US hedge fund GoldenTree Asset Management.
As a consequence of the deal, an assessment period was triggered for Johnston’s defined-benefit pension scheme. With 4,771 members and an estimated buyout deficit as at 30 June 2018 of £305m, the scheme was transferred into the government’s Pension Protection Fund (PPF).
TPR’s investigation focused on whether there was any viable alternative to the company entering administration, whether its timing had been artificially engineered to avoid a deficit repair contribution (DRC) of around £885,000 that was due to be paid only days after the pre-pack sale took place, and whether there were any acts before the administration that required further scrutiny.
In its regulatory intervention report, TPR said it “found no evidence to suggest that insolvency was avoidable nor that the administration was planned to circumvent payment of the DRC, nor that there were any acts pre-dating the administration worthy of further investigation.”
The regulator said it had concluded it “would not be reasonable” to pursue any further investigation.
“We have liaised with the administrator and the PPF to ensure that should any new and relevant evidence be uncovered by them this will be provided to TPR, and this may lead to us considering opening an investigation.”
Frank Field, the chair of the Work and Pensions Select Committee, condemned TPR’s findings.
“This nasty little trick of ‘pre-packs’ being used to bundle up a company bankruptcy and quietly jettison the pension scheme into the PPF has long been on TPR’s radar,” he said.
“The PPF raised the alarm straight off about the Johnston Press pre-pack, not least because its finances were in decent enough shape: they had some cash to put into the pension.
“How TPR has decided there’s no avoidance case to answer is beyond baffling – and there’s no real indication in their report, nothing to explain away our and PPF’s deep concerns. We hear over and over of TPR’s new ‘clearer, quicker, tougher’ approach: what on earth happened this time?”
In a letter sent to TPR last year, the committee said that while all parties were aware that the group faced “a very difficult task” in refinancing the £220m bond debt that was due for repayment in June 2019, “there was no indication that the business was cashflow insolvent and unable to meet its current debts as they fell due – indeed this has subsequently been confirmed by the administrators.”
Field added: “There is little in TPR’s report to explain why it has taken the different view – that there is no evidence that the company was avoiding its pension obligations – and the case renews concerns about TPR engagement with schemes while contributions are still being made.
“While it appears Johnston Press could have made that last payment [on 18 November], it still would have gone a relatively short way toward the expected shortfall to the PPF of £109m.”