Tuesday, 12 Mar 2019 10:49 GMT

Watchdog drops investigation into Johnston Press

Following an investigation into the pre-pack deal that saw Johnston Press sold to the new JPI Media, The Pensions Regulator has concluded there was no other viable option for the publisher.

The NUJ, the Pensions Protection Fund (PPF) and members of Parliament all voiced concerns over the details of the pre-pack administration which saw Johnston Press’ defined benefit pension scheme transfer to the PPF.

The Pensions Regulator opened an anti-avoidance investigation into the company to find out whether there was evidence to suggest that the board of Johnston Press had other options than to enter administration.

The Regulator concludes: “We found no evidence to suggest that insolvency was avoidable nor that the administration was planned to circumvent payment of the DRC (deficit repair contribution), nor that there were any acts pre-dating the administration worthy of further investigation.

“The administrators have also confirmed to us that their enquiries have not established any previous transactions which might require further investigation by them.”

Johnston Press was placed into administration in November 2018 following a strategic review that found the publisher could not repay a £220m bond that was due for repayment in June 2019.

We found no evidence to suggest that insolvency was avoidable nor that the administration was planned to circumvent payment of the DRC

In July 2018, Johnston Press approached The Pensions Regulator and the PPF to explore the possibility of a regulated apportionment arrangement (RAA), which allows a company to free itself from financial obligations to a pension scheme in order to avoid insolvency. The report concluded that “in this case, the indicative proposals did not meet PPF published guidance and were not progressed further.”

The businesses and assets of Johnston Press were sold to JPI Media, newly formed by the former’s bondholders, for £181m.

Pre-pack insolvencies are controversial in that they protect jobs and value of a business, but often at the cost of stakeholders who may lose out. The report adds: “Pre-pack insolvencies are a legitimate means of preserving jobs and value in a business which could otherwise end up in liquidation.

“Where pre-pack insolvencies result in the removal of sponsor support from a defined benefit scheme, the parties to the transaction should expect us to investigate whether there are grounds for us to take anti-avoidance action, particularly in circumstances where there is an association between the new owners and the previous owners or other stakeholders.”

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