P&O in dispute with pension fund over value of ships securing debt
P&O is locked in a dispute with its pension scheme over wide discrepancies in the value of ships secured by a £146million debt owed to the fund by the embattled ferry operator.
Grant Shapps, Britain’s transport secretary, yesterday urged Peter Hebblethwaite, chief executive of P&O, to resign after admitting the group deliberately broke the law by sacking 800 UK-based crew and replacing them with new cheaper agency staff.
The Financial Times reported last week that the pensions regulator was investigating concerns that P&O, which has the largest proportion of liabilities in the merchant marine rating pension fund, had failed to pay £146m sterling due to the scheme which serves about 100 groups.
P&O said all of the debt is secured by a guarantee on three of its ships – the Pride of Canterbury, the Norbay and the European Highlander. But according to people familiar with the details, the P&O valuation of two of the ships is 40-70% higher than the pension plan‘s estimates of their valuations.
A valuation of the three vessels provided to the Financial Times by independent expert VesselsValue gave them a total market price of around £45million.
In April 2021, P&O sold two older but similar ferries, the Pride of Bruges and the Pride of York, for €5m (£4.2m) per ship, according to the operator’s financial statements of ferry.
P&O owes most of the scheme’s overall £96m shortfall of £1.25bn, but has made no voluntary contributions since its 2006 acquisition by majority-owned logistics firm DP World by the Dubai Sovereign Wealth Fund. However, P&O has contributed more than £80m to the fund, which has 20,000 members, since 2016.
Guarantees are commonly used by pension trustees as a safety net in case an employer is unable to meet its obligations to a plan.
“Assets pledged to any pension plan as security are always important, particularly when contributions due to the plan may be unaffordable now or in the future,” said John Oldland, chairman of the Merchant Navy Ratings Pension Fund trustees. .
“However, the valuation of any secured asset must be realistic, viewed in the context of the total sum owed.”
P&O has lost £100m a year over the past two years and said it was not ‘sustainable’ with its current staffing structure.
Hebblethwaite told MPs on Thursday that the company would make pension repayments once its business was viable again.
“We have an agreement, and we will honor those agreements to make those refunds,” he told a parliamentary committee.
Last week the pensions regulator said it was “working closely” with MNRPF administrators to protect savers.
P&O declined to comment on pension plan debt.