Toys R Us Inc.'s plans to restructure its U.K. operations face defeat in a creditor vote, jeopardizing the local business's chances of avoiding insolvency.
Pension Protection Fund, which is acting for the U.K. arm's pension plan, understands that creditors will reject the court-led restructuring proposal at a Dec. 21 meeting, CEO Alan Rubenstein said in a letter to Frank Field, the chairman of the House of Commons' Work and Pensions Committee. The PPF has filed a proxy vote against the planned Company Voluntary Arrangement.
"Feeling compelled, despite our engagement with the company, to vote against the CVA proposals is clearly disappointing," Mr. Rubenstein said in the letter, which was posted on a parliamentary website. PPF decided to vote against the proposal after the retailer failed to agree on a top-up for its corporate pension plan.
Toys R Us U.K. proposed the voluntary restructuring, which includes shutting at least 26 stores, after its U.S. parent collapsed under online competition and debt from a $7.5 billion leveraged buyout in 2005. If the proposal is rejected, the U.K. unit is likely to seek court-led administration or liquidation, according to a court filing.
An external spokesman for Toys R Us declined to comment. The U.K. business listed a £79.9 million ($107 million) claim from trustees of its pension plan in the CVA proposal.
PPF, which operates a bailout fund for U.K. corporate pensions, asked the retailer to pay £8.9 million into its local pension fund over the next few months, Mr. Rubenstein said. Toys R Us U.K. didn't agree to this and it hasn't made a counteroffer, he said.
The pension bailout fund could change its vote if the retailer makes a new pensions offer, Mr. Rubenstein said in the letter. The bailout fund is partly paid for by levies on corporate pension programs.
