Monarch: MP urges change in law to protect pension schemes

The Guardian - 11 Oct 2017

The chair of parliament’s work and pensions committee has called for a change in the law following reports that the owners of collapsed airline Monarch may end up with a profit while the company’s pensioners lose out.

The Labour MP Frank Field expressed concern over claims that private equity group Greybull Capital could avoid losing money while the carrier’s pension fund – which is owed £7.5m – could be among creditors left with nothing.

Field, whose committee led an investigation into the collapse of BHS after its sale for £1 to former bankrupt Dominic Chappell, has now written to the chief executive of the Pension Protection Fund (PPF), Alan Rubenstein, questioning the status of the pension fund.

He wants to know if the PPF, which rescues pension funds attached to failed companies, has received any payments yet from Monarch relating to the £7.5m, and where the pension fund sits in the order of creditor preference.

Responding to the report, Field said: “How can it be that, once again, mega-rich individuals could walk away from a collapsed company with a bumper profit while ordinary people pick up the bill?

“This massively supports the case for the law to change, to robustly protect pension schemes.”

In response, Greybull said it hoped the PPF loan note would be paid back, if a sale of Monarch’s assets was successful.

In a statement, it said its original financing had been agreed by industry watchdog the Civil Aviation Authority and the PPF.

“Greybull has not taken out loan repayments, dividends or interest in the last three years,” Greybull said.

“Monarch’s demise cannot be reasonably attributed to the actions of Greybull. We have had a constructive relationship with the PPF since 2014 and aim to continue to do so.

“The administrators are working to maximise the proceeds from the sale of assets. If the recovery on assets is as speculated on in the press, we expect the PPF loan note to be paid in full.”

Britain’s longest-surviving airline brand was placed into administration earlier this month, leaving 110,000 customers abroad and 750,000 future bookings cancelled.

Greybull, which bought a majority stake in the airline three years ago, was said to have lost £250m in the collapse after pumping that much into the business. It bought 90% of Monarch in 2014 for a token £1, with the pension scheme owning the remaining 10%.

But the Financial Times reported that Greybull’s owners, the French brothers Marc and Nathaniel Meyohas, only put about £85m in cash into the business, with other financing coming from elsewhere – including from US aircraft maker Boeing, and a dowry from the Swiss Mantegazza family, who sold the business.

On top of that, the way that Greybull’s secured loans to Monarch were structured means it has first call on the airline’s assets, according to the report.

These are said to include about £30m of cash, takeoff and landing slots which could be worth £60m, and an engineering business which is not in administration. Other creditors, including Monarch’s pension scheme are likely to be left with nothing, the report said.

As part of the Greybull takeover, the pension scheme – which had a deficit of about £158m at the time – was separated from the company.

Pension regulators agreed to the move because they were satisfied Monarch would have gone bust within 12 months without the deal.

Malcolm Weir, director of restructuring and insolvency at the PPF, said it was in the process of responding to Field’s letter but added that, without the PPF’s protection in 2014 when the airline was restructured, Monarch pension scheme members would have faced significant losses.

He said: “The expected recovery for the pension scheme if Monarch had gone bust in November 2014 was £0.

“The £30m in cash secured for the scheme by the restructuring of Monarch was much more than the scheme would have otherwise received. The restructuring met the PPF’s published tests.”

Nick Fletcher, The Guardian