Dawson on brink after pension deal collapses

Business Correspondent/Personal Finance Editor

Saturday 21 July 2012

TEXTILE group Dawson Inter-national has failed to agree a rescue package for its 3320-member pension scheme with the industry regulator.

ScALED DOWN: Dawson International once owned Pringle and Ballantyne but is now reduced to the Barrie knitwear operation in the Borders.

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Simon Bain

The 140-year-old textile group is now facing administration with the potential loss of its surviving 200 jobs.

There is also uncertainty for more than 1900 former Dawson employees now working for other companies, who will lose at least 10% of their pensions if the company folds and the scheme enters the Pension Protection Fund (PPF).

Chairman David Bolton criticised the PPF's refusal to take over the pension liabilities at the right price to enable the company to continue trading as "outrageous". He said the company, which had spent £1.4 million on adviser fees over four years, had complied with the PPF's "primary requirement" to offer the fund a cash payment "significantly greater" than the company's insolvency value, along with a 33% stake in the company, to take over what were unsustainable pension liabilities. The textile empire which once employed 12,000 and owned Pringle and Ballantyne as well as significant US operations is now reduced to the Barrie knitwear operation in the Borders. Dawson struggled to a £550,000 profit last year while paying out £2.2m in pension costs, at a time when rock-bottom gilt yields, exacerbated by quantitative easing, have been piling the pressure on pension deficits.Mr Bolton said: "We came up with a package that was greater than insolvency, the PPF said there was not enough cash up-front, we significantly improved it, and their rejection was based not the insolvency value but on the value of the buy-out deficit of around £100m."To link it to something outside our control is outrageous. This is potentially the life or death of the company, but you are not given clarity as to what you need to deliver."Dawson's last published deficit under IAS accounting was £11m. This is understood to have risen to £17m last year, though the scheme's assets also rose, by £9m to £117m. The buyout value is the maximum possible cost of meeting all liabilities. The PPF's published guidelines say it must "secure more assets for the pension scheme than we could have got through an otherwise inevitable insolvency".Mr Bolton said: "The board cannot understand this decision. The PPF and the regulator have rejected the best possible offer from the company, which provided not only significantly more cash than is likely to be recovered through an administration process, but also the opportunity for further value to be realised through part-ownership of a profitable continuing business. "The consequence is likely to be that the [pension] plans ultimately enter the PPF, with the PPF receiving lower com- pensation, and furthermore approximately 200 jobs are put at risk."He added: "It should be a matter of wider concern that the UK pensions reporting and regulatory environment can produce such an evidently unsatisfactory outcome."Last September it was revealed the Dawson scheme had just 56 active members, yet was responsible for the pensions of 4300 people, including 905 in the US, of whom 2339 are retired and 1905 working for other companies.Dawson has already raised £12m from selling off its Todd & Duncan spinning arm at Kinross and its profitable US business and has this year been facing pressures from the rising price of cashmere. At the half-year it reported cash of £5m. The chairman said yesterday that if a deal had been agreed, "certain key shareholders may have been prepared to inject fresh capital to offer the PPF immediate cash rather than a loan note – this is not an unusual transaction for the PPF".Swedish activist investor Peter Gyllenhammar took a 29% stake in Dawson three years ago when the shares were 1.5p. Jan Holstrom, an associate of Mr Gyllenhammar, resigned from the board of Dawson yesterday.The chairman said it "simply has no more to offer", and would now enter discussions with its trustees and the regulator.Zahir Fazal, chairman of the Dawson UK pension scheme trustees, told The Herald: "We have worked extremely hard to try to find a solution where members would get benefits above the level of PPF. But at the moment it is looking as if PPF is inevitable." A spokesman for the Pensions Regulator said: "We were aware of the situation but can't comment further." He indicated that there had been only "a handful" of negotiated entries into the PPF.The Pension Protection Fund was also unable to comment but said its guidelines were published to ensure consistency of approach.Dawson shares crashed 45% to 0.62p.

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Dawson on brink after pension deal collapses

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