BHS pensions deficit is at least £160m, new owners are warned

Exclusive: Defiant Retail Acquisitions still determined to return retailer to the high street

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BHS’s new owners are likely to be facing a £160m hole in the company’s pension scheme, a leading pensions expert has said.

The warning from the independent pensions consultant John Ralfe came as company accounts revealed that the retailer’s underlying pension deficit had climbed to £139m by the end of August.

The department stores group was sold three months ago by Sir Philip Green for £1 to a little-known company called Retail Acquisitions.

According to accounts just filed at Companies House, BHS saw its pension scheme deficit rise to £139m for the year ended 30 August, from £136.6m the year before. After a £27.8m tax credit, the net deficit was £111.1m, up from £109.3m.

The pensions deficit is one of the biggest challenges facing Retail Acquisitions, which is backed by a number of investors including brokers and lawyers. Its largest shareholder – Dominic Chappell – has a chequered CV that includes bankruptcy.

Mr Ralfe warned that it would be tough for Retail Acquisitions to trim the deficit. He believes that, as at March 2015, the underlying deficit could have sunk a further £20m into the red.

He told The Independent: "The £139m pre-tax deficit at August 2014 would likely have risen to at least £160m by March – a higher value of assets will be more than offset by a higher value of pension liabilities, as long-term interest rates fall to new lows.

"A higher deficit will encourage the trustees to take an even tougher line with the new owners on the size of deficit cash contributions".

 The latest deficit figures also serve to support the belief of Chris Martin, the chairman to the trustees of the BHS pension fund, who said in March that the pensions hole was likely to be significantly higher than £100m.

A spokesman for Sir Philip's Arcadia Group said that it had agreed to make a contribution in each of the next three years.

The accounts also show that Arcadia increased its funding to the BHS business. The amount due to creditors within one year rose to £296.9m from £260.5m.

The group also cut more than 400 jobs, with headcount falling to 11,519 from 11,939, partly as a result of two shop closures in Canterbury and Bath, and a small restaurant.

However, since the new owners took over, they have pledged to return the British retailer back to its "rightful place" on the high street and quash fears about further job losses. A spokesman for Retail Acquisitions said: “We were aware of the nature of this challenge when we acquired the business. Our plan is to address this over time by returning BHS to its rightful and profitable place on the high street. We are speaking to all stakeholders and are confident that we will deliver this turnaround.”

Property agents have already been hired to explore options for 51 shops across the UK including in Wood Green, north London, Barnstaple and Dundee. This could see underutilised space sublet and rents renegotiated.

Darren Topp, who was promoted to BHS chief executive in April, said last month that he wants to boost performance at the loss-making company through a series of tie-ups with other retailers and ramping up its food offer.

He also backed Mr Chappell and said: “I think Dominic has been a force for good in this business.”