Debenhams, the struggling department store chain, is closing in on a potentially controversial deal that will guarantee future benefits to members of its executive pension scheme.
Sky News has learnt that Debenhams is in advanced talks with Aviva about a buyout of its executive pension scheme, which is understood to hold just over £200m of assets.
The agreement, which could be struck within weeks, would come as the ailing retailer brings the shutters down on dozens of loss-making stores around the country.
Such buyout transactions have become commonplace as companies seek to gain certainty over their liabilities to pension scheme members.
In Debenhams’ case, however, a deal could be contentious because the larger scheme, covering the majority of its workforce, will not be included.
Sources said the trustees of the main Debenhams Retirement Scheme were aiming to secure a deal in the longer term with a consolidation vehicle such as the Pension Superfund or Clara Pensions.
The precise sizes and funding positions of the two schemes were unclear this weekend, although the larger plan is understood to have a substantial deficit.
Brunswick Group, which handles media enquiries on behalf of Debenhams, did not respond to several requests for details of the chain’s pension schemes.
A spokesman for the schemes’ trustees declined to comment.
It was unclear this weekend whether Aviva was formally in exclusive talks about a buyout of the Debenhams Executive Retirement Scheme.
Debenhams, which is now privately owned after a 15-year stint as a stock market-listed business, has endured a torrid period in which its trading performance deteriorated and it was forced into a brief spell in administration.
The retailer’s most recent annual report, published in 2018, disclosed that the executive pension scheme was fully funded at its last actuarial valuation in 2017.
Debenhams agreed in 2017 to make annual contributions of £5m into the pension schemes until March 2022.
That funding plan replaced an agreement under which it had agreed to contribute £9.5m-a-year to the schemes.
Debenhams has not published figures revealing its festive trading performance, although a further reminder of the parlous state of the department store sector emerged this weekend when The Sunday Times revealed that Beales – which trades from 22 outlets – had filed a notice of intention to appoint administrators.
Advisers at KPMG are said to remain hopeful that a rescue deal can be stitched together.
For Debenhams, the next few months are likely to determine whether it can survive in the medium term.
It has recently undertaken a further shake-up of its management, bringing in Mark Gifford, a former finance chief at House of Fraser (HoF), as its chairman.
Mr Gifford and the chain’s chief executive, Stefaan Vansteenkiste, are now focused on delivering a turnaround plan that involves closing approximately 50 stores with the loss of thousands of jobs.
That plan was part of a Company Voluntary Arrangement, which spent much of last year embroiled in a legal battle funded by Mike Ashley’s Sports Direct International – now called Frasers Group.
Mr Ashley had fought a running battle with Debenhams, lodging a string of proposals that would have given him control of the business and allowed him to combine it with HoF, which he acquired out of administration in 2018.
Mr Ashley has bemoaned the state of HoF and described its problems as “terminal”.
Last autumn, Debenhams lined up £50m of additional financial support to see it through to the Christmas trading period.
Hedge funds including Goldentree Asset Management and Silver Point now own big stakes in Debenhams.