Toys R Us could go into administration

Toys R US To Close 87 Stores

The potential administrative death of the chain has been brought into view by the Pension Protection Fund, which has demanded the struggling group pays £9m into its employee pension fund in order for the PPF to agree to restructuring arrangements.

The loss-making British arm of the USA toy retailer boosted Roger McLaughlan's pay to £1.3 million ($2.2 million) in the year ended January 30, 2016, from £1 million and £356,000 in the previous two years, Frank Field, the chairperson of the House of Commons' works and pensions committee, said in a December 18 letter to Toys "R" Us U.K.'s current head, Stephen Knights.

Under the current proposal, Toys R Us plans to shut around 26 stores, renegotiate leases and cut 500 jobs. That deal would lead to the loss of up to 800 jobs.

The Daily Telegraph understands that the PPF are working on the basis that if the CVA is not passed at the meeting, Toys R Us will come up with a new solution.

One source indicated that the additional contributions offered by Toys R Us over the next three months would be marginally superior to the likely returns to the PPF if it were to fall into administration.

The group's U.S. parent is also unable to lend its United Kingdom subsidiary the cash under the terms of its court-led bankruptcy protection.

However, the organisation has said discussions are still ongoing with Toys R Us and its advisers, and it is prepared to change its vote if suitable assurances are made on the future of the company's pension scheme.

Malcolm Weir, director of restructuring and insolvency at the PPF, said: "Given the position of the company, we strongly believe seeking assurances for the pension scheme is reasonable given the deficit in the scheme and questions about the overall position of the company".

Concerns have also been raised about the write-off of £584.5m in loans owed by a Toys R Us firm based in the British Virgin Islands as part of a group reorganisation past year and what impact this might have on the pension scheme.

Representatives for Toys "R" Us U.K. and PPF declined to comment.

All Toys R Us shops will remain trading through Christmas, but if the CVA is approved, those stores affected will begin closing from the spring.

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