KPMG ADMINISTRATORS have been appointed to a UK manufacturer after it failed to strike a deal with the Pension Protection Fund.
Dawson International, the UK's largest cashmere manufacturer, has collapsed after the Pension Protection Fund (PPF) rejected a deal to take on pension liabilties at the 140-year-old company.
Blair Nimmo and Gary Fraser, from KPMG, were appointed joint administrators to the business, which employs about 180 staff. It has two trading subsidiaries based in the US and UK.
Dawson offered cash upfront, as well as 33% of the group's share capital, to the PPF, in exchange for it taking on the pension liabilities. However, the PPF shot it down in July.
"Our proposal, which was all we could possibly afford, would have delivered significantly more to the PPF than it is likely to receive from administration," said Dawson International chairman David Bolton.
He added that the PPF decision was "deplorable" and that the business made all contributions to the pension scheme as they fell due, while shareholders received no dividends for more than ten years.
"There was no commercial sense in turning down this proposal and forcing the business into administration," he said.
He added a propoposal was submitted to the PPF more than 15 months ago, and labelled the system "flawed", due to the time and costs involved.
"Those tasked with regulation must be prepared to recognise what is a significant and growing problem for many companies struggling with crippling legacy pension issues, and bring a more enlightened approach to protecting pension members' interests," he said.
Following rejection from the PPF, Dawson was served a notice to repay £129m of debt to the Pension Scheme Trustees by 19 August, something the business was unable to fulfill.
There are currently only about 60 employees contributing to the pension scheme at Dawson, with more than 3,500 deferred (former workers) and pensioner members and a pension fund deficit of more than £50m, according to a consultant at actuarial business Barnett Waddingham.
Barnett Waddingham consultant Malcolm McLean warned there could be more administrations to come as companies struggle to keep up with pension liabilities.
"Dawson is not the first and probably won't be the last company to come adrift as a direct result of its pension legacy," he said.
"Reducing the size of the company's operations and its attendant workforce doesn't cancel out all the pension liabilities that have built up over the preceding years. In fact, those liabilities are likely to grow as more and more former workers with preserved rights within the scheme reach retirement age."
According to McLean, Dawson had been making £400,000 a year in regular contributions but was paying an additional, unsustainable £1m annually to keep the scheme running.
The US subsidiary, which operates as Dawson Forte, is not in administration and continues to trade under the control of its directors. KPMG administrators will continue to trade Barrie as a going concern while it seeks a buyer.
In the year ended 31 March 2012, Barrie's turnover was £9.7m and generated a pre-tax profit of £1.1m.
Could the pension deficit be linked to the period some years ago when the Government gave firms a 'pension holiday' on the basis that these funds held vast amounts of money which was more than adequate to cover future needs? The workers, however, were still obliged to pay into the scheme. Some firms were even allowed to take out the 'surplus' Then reality broke as returns on investments dropped dramatically. did no one stop to think that good times do not last forever, and past performance is no guide to future performance?
Pension scheme deficits are the cause of many business collapses.
Posted by: HUGH DUNLOP, 18 Aug 2012 | 22:37
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