Rutland Partners gains at expense of pensioners in Bernard Matthews selloff

• Letter from Boparan Private Office (pdf, 1MB)
• Letter from Deloitte (pdf, 129KB)
• Inquiry: Pension Protection Fund and Pensions Regulator
• Work and Pensions Committee

Background 

Bernard Matthews was sold in September 2016 by Rutland Partners to Boparan Private Office (BPO) via a "pre-pack" administration process overseen by Deloitte. The use of this insolvency procedure as part of the transaction meant that the Bernard Matthews defined benefit company pension scheme – with a deficit estimated at up to £75m – was jettisoned into Pension Protection Fund (PPF) assessment.

The letters confirm that BPO had previously offered to buy Bernard Matthews outright and to assume ongoing responsibility for the full liabilities of the pension scheme. This offer was rejected by Rutland Partners as it would have involved a write off of the majority of their outstanding loans to the company they owned.

Pre-pack administration

Bernard Matthews was instead placed into pre-pack administration, a process which placed Rutland Partners ahead of the pension scheme in the hierarchy of creditors. This arrangement delivered a much improved financial outcome for Rutland Partners but drastically reduced the amount recoverable by the pension scheme – to potentially less than 1p in the pound.

Deloitte's letter also confirms that the purchase agreement was not accompanied with any assurances to the pension scheme or the PPF regarding the safeguarding of pension rights.

The pension scheme trustees did not consent to the loss of their secured claim, meaning that an application to the High Court was necessary to force this through. The PPF is currently assessing the scheme and pursuing a claim for the full section 75 debt due to the scheme, estimated at up to £75 million.

The Bernard Matthews case raises concerns about the use of pre-pack administration as a means of shedding responsibility for pension liabilities and transferring them to the PPF lifeboat.

Chair's comments

Rt Hon Frank Field MP, Chair of the Committee said:

"I have confidence that the PPF, working with the scheme trustees, will act in the best interests of the pensioners, but it's clear that the former owners passed up a better deal for pension scheme members in favour of lining their own pockets."

Timeline

• September 2013 - Rutland Partners, a private equity firm, acquires control of Bernard Matthews by means of a secured loan of £25 million
• June/July 2016 – Two separate offers (one by BPO and the other by an undisclosed bidder) were made to purchase Bernard Matthews – these were both rejected by Rutland Partners as these would have involved a write-off of most of Rutland's secured loans.
• August 2016 – BPO approaches Rutland with an offer to acquire the business through a pre-pack administration, representing a "significant uplift" in the amount recoverable by Rutland Partners.
• 25 August 2016 – BPO formally offers to purchase the Bernard Matthews business and assets
• 29 August 2016 – Rutland Partners engage Deloitte to assist in progressing the sale to completion.
• 8 September 2016 – Deloitte asks the Trustees and other secured creditors for their consent to the sale and the release of their respective securities.
• 13 September 2016 – Trustees respond to Deloitte to say that they do not consent to the release of the scheme's security.
• 20 September 2016 – Court order is made allowing the sale of BM free of security. Deloitte is appointed as Administrators of Bernard Matthews – a few hours later the transaction is completed, with the purchaser acquiring the business and assets out of administration for £87.5m. The pre-pack administration of Bernard Matthews is an insolvency event triggering the entry of the pension scheme into PPF assessment.
• 3 October 2016 – The administrator Deloitte publishes its proposals for the distribution of the £87.5m sale proceeds to creditors, including a full £46.6m repayment of bank debt and up to £39m to Rutland Partners in respect of its secured loans. The pension scheme by contrast receives nothing in respect of its £17.5 million secured debt claim and stands to recover less than 1p in the pound in respect of its liabilities from the remaining proceeds.
• January 2017 – The Pension Protection Fund is reported to have lodged a claim to recover the full section 75 debt in respect of the pension scheme's 'buyout' deficit, estimated at up to £75 million

Further information

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