Pensions regulator to slam Silentnight following pre-pack

THE PENSIONS REGULATOR is preparing to force Silentnight owner HIG Europe to pump funds into the existing pension scheme following its pre-pack administration.

Sky News reports that the watchdog is considering putting HIG on a contribution notice which could see the private equity business forced to inject as much as £30m into Silentnight’s pension scheme.

The regulator confirmed in 2011 that it was investigating HIG under its ant-avoidance powers after the Silentnight scheme was offloaded to the Pension Protection Fund (PP Online, 19 May 2011).

HIG bought the business in May 2011 through a pre-pack administration which sees a company marketed and a buyer lined up prior to entering an insolvency process and sold immediately on appointment of administrators. 

The company ended up with a £100m black-hole in its pension scheme after lenders pulled bakc all credit facilities. 

Originally in May 2011 insolvency practitioners from KPMG had organised a Company Voluntary Arrangement (CVA) for Silentnight – which consolidates debts and arranges to repay a percentage over a contracted period of time while continuing to trade. All CVA’s must be voted for by 75% of creditors, by value, to achieve approval.

However, the largest creditor the Pension Protection Fund (PPF) made it clear it would veto the proposal, which would see it receive about 6p for every pound owed and 10% equity. Silentnight was subsequently sold via a pre-pack. 

This week, a spokesman from the pensions watchdog said: “The regulator has a continuing investigation into the potential use of its ‘moral hazard’ powers, but we are unable to comment further on this matter. We do not comment in detail on individual companies or pension schemes.”

A spokesman for HIG said: “In 2011, HIG European Capital Partners purchased certain assets of Silentnight following its administration in 2011 by way of a pre-pack arrangement. The acquisition safeguarded some 1,000 jobs in Lancashire but did not include acquisition of Silentnight’s pension scheme liabilities.

“The pension scheme in question was subject to a significant deficit which had been allowed to accrue over a number of years, prior to HIG’s involvement, and which had been exacerbated by reduced contributions as Silentnight sought to trade its way out of difficulty.

“Since that period, The Pensions Regulator has begun an investigation into the matter which we have complied with fully. The matter is subject to an ongoing legal process and therefore detailed comment would be inappropriate.”

A version of this story first appeared on Accountancy Age’s sister publication Professional Pensions


Related reading