The future of Dawson International is uncertain following the Pensions Regulator’s decision to reject its proposals regarding its pension schemes and the Dawson share price almost halved.
The share price fell 0.53p to 0.62p, valuing Dawson, which warned that it may be forced to go into administration, at £1.41m.
Dawson has been negotiating with the Pension Protection Fund (PPF) and the Pensions Regulator about the entry of its UK defined benefit pension plans into the PPF but this move has been rejected. The plan was for the PPF to take responsibility for the pension plans in return for a cash payment, loan note and a shareholding in Dawson. Management argues that its offer was significantly better than the insolvency value of the business but it was not deemed sufficient.
The PPF argues that compensation on offer was not enough in comparison with the size of the deficit it was being asked to assume. The PPF used the buyout value of the pension funds rather than the liability basis which is much lower. The actuarial value of the liabilities fluctuates significantly.
Discussions with the plans’ trustees and the Pensions Regulator will commence in order to assess the options. Dawson warns that if no agreement can be achieved and the required payments are too large to be affordable then Dawson would have to consider appointing an administrator for all or part of the group.
The balance sheet liability was £12.9m at the end of September 2011 but the most recent actuarial valuation suggested a deficit of more than £50m.
“We believe that our proposal provided significantly better, guaranteed returns than insolvency and we are surprised by the PPF’s decision, says Dawson chairman David Bolton
The most likely outcome is the pension plans entering the PPF but with a lower payment and at the risk of 200 jobs, according to Bolton.
Jan Holmstrom has resigned as a non-executive director as a result of this decision.
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