Bernard Matthews deal “carefully crafted” to extract maximum cash
The Bernard Matthews acquisition was “carefully crafted to extract maximum cash from the company”, a Commons Work and Pensions Committee has been told.
The deal, which saw the turkey producer bought as part of a pre-pack administration deal by Boparan Private Office from Rutland Partners, was completed last month for £87.5 million (m).
According to Professor Prem Sikka of the University of Essex, who compiled the report for the select committee: “The administration strategy seems to have been carefully crafted to enable secured creditors and controllers of Bernard Matthews to extract maximum cash from the company and dump the pension scheme and other liabilities.”
He added: “No attention has been paid to the hardship caused to retired and existing employees.”
In his report, Sikka went on to say that the administrators’ “proposals” showed that the sale proceeds would be used to make a full payment of £46.6m to lenders Wells Fargo Capital Finance (UK) Limited and PNC Financial Services UK Limited.
“Rutland has already received £34m and is likely to receive £39m in total. In contrast, the Bernard Matthews Pension Fund, recording a published deficit of £17.5m which is likely to have grown to £20, is set to receive no more than 1p in the pound, or perhaps next to nothing. Unsecured creditors of £39m are unlikely to receive more than 1p in the pound.”
The Pensions Protection Fund is expected to take on the company’s pension deficit, although this would see members of the scheme experience a reduced pay out.
Sikka said that unsecured creditors would bear the brunt of the cost. “Due to the so-called business-friendly laws, there has been no discussion with unsecured creditors, who stand to lose the most. Indeed, there is little chance they can do anything to secure their position. This will have an adverse effect on supply chain creditors, many local businesses [such as] farmers, plumbers, electricians, garages, local services and, of course, their pension schemes. As the details of business sale remain confidential, it is not possible to know whether the outcome is the best or the fairest for all stakeholders.”
Sikka recommended changes to insolvency laws and suggested: “In the interest of fairness to creditors, especially unsecured creditors, there should at least be a 14-day notice to raise objections to the proposed business/asset sale and the outcomes of the proposed sale. The Administrator should not be in a position to present a fait accompli to creditors.”
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- bernard matthews
- Rutland Partners
- Boparan Private Office
- Professor Pem Sikka
- University of Essex
- Wells Fargo Capital Finance Limited
- PNC Financial Services UK Limited
- Bernard Matthews Pension Fund