The chairmen of two parliamentary committees say private equity firms accused of asset-stripping Debenhams should be quizzed about the fate of the department store’s pensioners – who face a 10 per cent cut to their retirement payments.
Darren Jones, who chairs the business, energy and industrial strategy committee, and Stephen Timms, chairman of the work and pensions committee, spoke out in the wake of the business’s collapse.
The final stores closed their doors in May, bringing an end to 243 years’ trading – although the website was bought by online fashion retailer Boohoo. Closure of the chain cost 18,500 people their jobs over the last 12 months.
The final Debenhams stores closed their doors in May, bringing an end to 243 years’ trading – although the website was bought by online fashion retailer Boohoo
The Debenhams pension fund is currently under assessment by the Pension Protection Fund (PPF), which rescues retirement schemes when firms go under.
If it takes the scheme over, payouts will be reduced by 10 per cent for members who have not yet reached retirement age.
Timms, a Labour MP, said: ‘PPF assessment is a lengthy process and members of the Debenhams pension schemes still face a lengthy wait to find out how their pensions will be affected.
‘If the schemes do enter the PPF, there will be serious questions to ask about the role of the private equity consortium and whether more could and should have been done to protect pension scheme members.’
Fellow Labour MP Jones said: ‘Too often in the past, private equity owners have bought up household British businesses, loaded them with debt, resulting in the core business being undermined and workers, customers, and pensioners worse off.
‘If the Debenhams pension schemes do end up in the PPF then their previous private equity owners should be accountable for their decisions on how far they protected pension scheme members.’
The pension fund is believed to be around £32million in deficit, less than annual bonuses once paid to individuals associated with the private equity consortium of CVC, Merrill Lynch and Texas Pacific Group, which owned the firm for three years between 2003 and 2006.
One private equity executive who helped orchestrate the Debenhams takeover in 2003 reportedly made more money in one year than the entire shortfall in the failed department store chain’s pension fund.
According to newspaper reports, Jonathan Feuer was believed to be one of five partners at CVC who shared £250million in 2007 – an average of £50million each – the year after the department store returned to the stock market.
Anger: Darren Jones, left, who chairs the Business, Energy and Industrial Strategy committee, and Stephen Timms, right, chairman of the Work and Pensions committee
The 59-year-old retired from CVC in 2018 and has since co-founded an artificial intelligence firm for the finance industry.
Former Debenhams chief executive Rob Templeman, who owns a central London home thought to be worth £4million, was paid £7.9million in salary and benefits by his employer between 2003 and 2011.
But, in 2007, the Financial Times estimated he and two other directors made personal profits of £103million from when the company was refloated in 2006, with Templeman netting £41million.
Meanwhile, TPG Capital’s one-time European boss Philippe Costeletos, 56, said to have been the ‘mastermind’ of the Debenhams takeover – is also thought to have enjoyed multi-million-pound bonuses.
During that period, the firm was loaded with more than £1billion debt, £1.2billion was extracted in dividends – almost double the profits made over the period – while store freeholds were sold and leased back, on expensive, upwards-only rental contracts, to raise £495million.
Dozens more branches were opened, adding dramatically to the company’s rent bills which rose 55 per cent in the next ten years.
Debenhams struggled to meet its requirements to fund the pension in recent years as it buckled under demands to pay off the debt, plus rents and business rates.
Shoppers remained loyal – with the £2billion annual turnover holding steady – but much of the revenue went into lopping £900million off its debts.
The store chain was in the black up to 2017 but went into administration in 2019 partly because of the cost of store leases.
Debts had risen to £622million. A buyer could not be found for the stores, once a fixture of the High Street.
Speaking earlier this year, Margaret Hodge, ex-chairman of the Commons public accounts committee, accused the private equity barons of asset-stripping, adding: ‘The companies involved in the consortium have made profits in an immoral way.’
CVC, Merrill Lynch and TPG have declined to comment about decisions taken when they ran Debenhams and the collapse of the business.
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