Questions over pre-pack rescue of Johnston Press

(c) Sky News 2018: <a href="http://news.sky.com/story/jobs-secured-as-publisher-of-i-newspaper-is-bought-by-creditors-11557844">Questions over pre-pack rescue of Johnston Press</a>
 

A leading MP is calling for answers over the sale of Johnston Press (LSE: JPR.L - news) after it went through a pre-pack administration that looks set to tip responsibility for its pensions into a lifeboat scheme.

Frank Field, chair of the Work and Pensions select committee, has written to The Pensions Regulator (TPR) to ask about its involvement in discussions with the company behind 200 newspapers including The Scotsman, the i, and the Yorkshire Post.

Mr Field said it was "difficult to understand" how the new owners were able to acquire the business without taking responsibility for pension schemes.

The independent MP also questioned whether there were adequate safeguards to stop liabilities being "dumped" on the Pension Protection Fund (PPF (Shenzhen: 300258.SZ - news) ), which is paid for from levies on other schemes.

JPIMedia - a consortium of the group's creditors - took over Johnston Press on Saturday (Shenzhen: 002291.SZ - news) a day after it went into administration , with the company admitting defeat in its efforts to refinance £220m of debt due in June next year.

The deal means much of the company's debt pile - as high as £793m at one stage - will be written off.

JPIMedia, led by Golden Tree Asset Management, said £135m of liabilities would be erased while £35m of new investment was promised.

However, the pensions lifeboat, the PPF, is on course to come to the rescue of workers on the defined-benefit scheme as it was not to be transferred to JPIMedia, which offers a separate scheme.

Mr Field has written to Lesley Titcomb, chief executive of The Pensions Regulator, for a detailed explanation of its involvement to date with Johnston Press.

He said: "In particular, it would be helpful to have an explanation of why it was not possible to find a solution that would have avoided the pension scheme entering the PPF.

"It is di fficult to understand why it is possible for JPIMedia to acquire the business, no doubt in the expectation of generating a profit from it, but without taking any responsibility for its pension scheme.

"Might I ask whether, in the light of this and similar cases, you consider that adequate protections are in place to prevent schemes being dumped on the PPF, at cost to pensioners and levy-payers."

Meanwhile, Johnston Press shareholders are tipped to receive nothing as it was deemed to have no value following the failed sale process.

Custos Group, its largest investor, said: "Their actions today, ensuring their own jobs are safe, but sacrificing the pensions of their loyal staff, many of whom will no doubt also lose their jobs under the new ownership of a US hedge fund, is simply a disgrace and a vulgar display of the worst elements of capitalism."

JPIMedia insisted its rescue "secures jobs and (the) future of its brands and titles".

Director John Ensall said: "In the absence of another financial solution being available for the business, we are pleased to have reached this agreement to acquire Johnston Press, to protect the value of the business, preserve jobs and allow for the uninterrupted publication of its websites and newspapers.

"As part of this transaction we have reduced the level of net debt very significantly and invested £35m to put the business in a far stronger financial position.

"We look forward to working with the management team as they embark on the next chapter in Johnston Press's story in the media sector, with the resources to support local and national journalism and embrace the digital future."

A PPF spokesperson said: "We are aware of the insolvency of Johnston Press and that the assets of the business have been sold.

"We anticipate formally confirming that the pension scheme has entered PPF assessment shortly. Members can be assured that the PPF is there to protect them."

The National Union of Journalists earlier demanded "meaningful guarantees" on the future of jobs and titles.