Pensions warning for Sea Containers

Sea Containers, the bankrupt parent company of the train operator GNER, has received a stark warning from the UK pensions regulator over its pensions black hole.

David Norgrove, the regulator, has threatened to use his powers to force the group to make good its pension deficits, which would be the first time the powers have been used since the office of the pensions regulator was created 18 months ago.

A spokeswoman for the pensions regulator said: "We haven't used our powers as of yet. We would look at each individual case and if it was appropriate and reasonable we would do so." She declined to comment on Sea Containers specifically.

Once a sprawling transport and shipping group, the US-listed firm filed for Chapter 11 bankruptcy protection last month after it was unable to make a $115m (£62m) bond payment. Under the filings, it listed $650m in debts and just $67m of free cash.

The firm is expected to hold meetings with creditors in New York this week. The largest group, the bondholders, are owed $387m. Sea Containers' second-largest group of creditors are two UK pension schemes, which together cover about 1,300 staff, pensioners and deferred members. The schemes have a combined deficit of £133m. Workers at GNER are not affected as they are part of a separate rail-industry pension scheme.

Sea Containers said in a recent filing with the US Securities and Exchange Com-mission it had received notices on 19 October "warning the [UK pensions] regulator is considering exercising its powers to issue financial support directions (FSDs) to the company under relevant UK pensions legislation."

The group said: "If FSDs are issued to the company, it may be liable to make a financial contribution to one or both of the schemes." It said the trustees of the schemes had advised the company that the cost of winding them up would be £134m in total - £107m for the 1983 scheme and £27m for the 1990 fund.

However, Sea Containers cautioned: "These estimated costs have not been agreed by the company, and no FSDs have been issued. The company is considering its reply to the regulator's warning notices and does not accept that it is reasonable or appropriate for the regulator to issue FSDs". A Sea Containers spokeswoman reiterated this position yesterday, adding the company was in talks with the regulator but it was early days. She stressed: "The pension funds will rank on the same level as the other creditors."

The company's former founding chairman, James Sherwood, has refused to take responsibility for the group's collapse and has instead hit out at the high price (£1.3bn) the Government has charged for the GNER rail franchise.