Cashmere firm in crisis after regulator rejects pension rescue

By ERIKKA ASKELAND
Published on 20/07/2012 09:38

Cashmere firm Dawson International has warned 200 jobs are at risk after long-running negotiations with a government-backed pension rescue scheme have failed.

The firm said it now has to negotiate a deal with the company’s estimated 4,000 pensioners, but warned that if no agreement is reached it “would have no alternative but to consider appointing administrators for all or part of the group”.

Investor Jan Holmstrom has left board of Dawson with immediate effect following outcome of “disappointing” negotiations with the Pension Protection Fund (PPF) and the Pensions Regulator over the group’s estimated £50 million pension fund shortfall.

In May, the group’s board applied to have the fund entered into the PPF scheme in return for a cash payment, loan note and equity stake in the company.

But the PPF and the regulator rejected the deal and told the board that the compensation offered was “insufficient in comparison to the size of the deficit”.

The board claims that the terms were “significantly better” than would be the case if the company was made insolvent, adding that Hawick-based Dawson “simply has no more to offer”.

The number of members in the scheme is far bigger than its current number of employees, reflecting the fact that Dawson used to be a huge company employing some 12,000 people. In December the company reported a pre-tax profit of £1.1m for the six months to 1 October compared with £1.7m last time. Sales fell 7.8 per cent to £19.8m.

David Bolton, chairman of Dawson International, said: “We have worked tirelessly over the past four years in order to achieve the best possible outcome for our pension scheme members whilst also enabling our 140-year-old UK business to continue to develop and invest.

“We believe that our proposal provided significantly better, guaranteed returns than insolvency and we are surprised by the PPF’s decision. In the event of administration, while we would expect that a new owner would be found quickly, there remains a real risk that a successful and profitable UK heritage business will suffer from a period of uncertainty.

“It should be a matter of wider concern that the UK pensions reporting and regulatory environment can produce such an evidently unsatisfactory outcome.”