MFI pension scheme gets a boost from £150m bank refinancing deal

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The Independent Online

The move means the MFI pension fund - which has one of the largest pension deficits in the UK relative to its parent company's size - will have the first call on the assets of Howden Joinery, MFI's most profitable subsidiary, in the event the group goes bust.

The scheme will also have the second call, after the group's bank, on the rest of the company's assets.

Previously, the fund had been an unsecured creditor - putting it at risk of receiving nothing in the event that the company was forced into receivership.

The news came as the company announced a new 39-month £150m secured banking facility, with Lloyds TSB, which will replace the group's existing revolving credit facility. However, it added that the security for the pension fund would remain in place for as long as it held its loan with Lloyds TSB.

In a statement to the market yesterday, the company said it had received clearance from the Pensions Regulator for its new creditor structure, as well as the blessing of its pension scheme trustees.

Commenting on the news, Matthew Ingle, the company's chief executive, said: "This is good news for MFI. The new facility will allow MFI to focus on its turnaround plans for UK retail and the growth of Howden."

In a brief note about the move, Richard Ratner, an analyst at Seymour Pierce, said he believed the debt restructuring was not as promising as it may appear. "At first sight it may appear good news, as it gives extended facilities and also means that it is likely that there will be no rights issue," he said.

"However, the previous facilities were unsecured, and this, now being reversed, together with the fact that the pension fund is also taking a charge, is a clear indication, in our view, that not only will the results on 28 February be awful, but so will the report on current trading."

Shares in MFI bounced 17 per cent on Tuesday, after the company announced it had sold its French Kitchens division, Hygena, for a better-than-expected £92m. The bounce wiped millions of pounds off the portfolios of several hedge fund investors, who had been heavy short-sellers of the stock. The company recently admitted it had more short-sellers than any other stock in the UK.

At the end of last month, MFI shares slumped to five-year lows of 55.5p. However, they had recovered to 87.5p before yesterday's news - which sent the shares back down 3.5 per cent to 84.5p. The company has a market value of £524m.

The debt restructuring is the latest in a series of strategic moves by Mr Ingle, who has been conducting a wholesale review of the company since he took over as chief executive in October. Mr Ingle has already withdrawn from joint ventures in Taiwan and the UK, and has closed its Howden Millworks business in the US.