Bernard Matthews deal under fire for extracting ‘maximum cash’

By Noli Dinkovski contact

- Last updated on GMT

Bernard Matthews sale: the pension pot is likely to receive 1p in the pound at best
Bernard Matthews sale: the pension pot is likely to receive 1p in the pound at best

Related tags: Bernard matthews, Tax

Bernard Matthews’ takeover by 2 Sisters boss Ranjit Boparan appears to have been “carefully crafted” to enable secured creditors to extract maximum value from the company – while at the same time dumping the pension scheme and other liabilities – a Work and Pensions Committee briefing has concluded.

The company’s pension pot, believed to have grown to £20M, is likely to receive 1p in the pound at best, according to a briefing written by Professor Prem Sikka of the University of Essex, published today (October 10).

Bernard Matthews was sold to Amber Residential Developments Ltd (now known as Bernard Matthews Foods Ltd) and Amber Real Estate Investments Ltd – both part of Boparan Private Office – on September 20.

The sale proceeds of the company will be used to make a full payment of £46.6M to lenders Wells Fargo Capital Finance (UK) and PNC Financial Services UK Ltd, the paper found.

Bernard Matthews’ former owner, private equity vehicle Rutland Partners, has already received £34M, and is likely to receive a total of £39M.

Legal fees

Administrator Deloitte has already billed £790,000, and legal fees are likely to amount to £668,000, the briefing explained.

The briefing said: 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.

“No attention has been paid to the hardship caused to retired and existing employees.”

Rutland Partners said it had invested “significant funds” ​into the Bernard Matthews business over the last three years in a continually challenging market.

It added: “While disappointed that the business has continued to struggle during our ownership, we are pleased that it has now been acquired by Ranjit Boparan with access to a large, UK poultry group and that all the jobs have been preserved.”

‘Better result’ for creditors

Deloitte said its purpose as an administrator was to achieve a “better result”​ for the creditors as a whole than would be obtained through an immediate liquidation of the companies.

It added that the sale had achieved this, “given the preservation of employment in Bernard Matthews Ltd, avoiding employee redundancy claims”​ and the “enhanced returns to the secured creditors and the resultant reduction in secured creditor claims”.

Meanwhile, the Work and Pensions Committee is set to review how pre-pack arrangements affect pension liabilities, after it emerged last week that the Pensions Regulator was powerless to prevent such transactions going ahead.

The government’s Pension Protection Fund is expected to absorb much of Bernard Matthews’ pension liability.

Frank Field, Labour MP for Birkenhead and chairman of the Committee, said: “What looks likely to be an increase in these pre-pack arrangements, which act to the huge detriment of pensioners, and bump up still further the levies on good employers through increased Pension Protection Fund contributions, is no doubt an issue the Committee will want to look at early on Parliament's return.

“We expect that the government will soon publish a new Pensions Bill, and this may offer the Committee an opportunity of proposing further reforms so as to protect better the position of pensioners in circumstances similar to Bernard Matthews Ltd.”

In one of its early reports of the current Parliament, the Committee requested that the government introduce a new Pensions Bill to strengthen the regulation of pension master trusts.

No response had been received from Boparan Private Office at the time of publication.

Meanwhile, read why the amount owed to Bernard Matthews’ unsecured creditors could top £39M​.

Related topics: Supply Chain, Meat, poultry & seafood

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