Former Swiss billionaire owners of Monarch tried to dump pension scheme for less than £10m, says PPF

 
Oliver Gill
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Monarch Airlines fell into administration in the early hours of 2 October (Source: Getty)

Monarch Airline's former Swiss billionaire owners attempted to ditch the doomed airline’s pension fund for only a fraction of the final settlement in 2014, the UK’s retirement lifeboat says.

The Mantegazza family, headed by the 12th richest person in Switzerland, carved out Monarch’s retirement scheme as part of a £1 sale to Greybull Capital.

Three years ago, a deal was struck that allowed the pension scheme to fall into the Pension Protection Fund (PPF), with the Mantegazzas making a £30m mitigation payment.

In addition, Greybull gave the PPF a 10 per cent shareholding in Monarch and the airline issued the lifeboat a £7.5m loan note.

But Mantegazza’s first offer was a cash payment of less than £10m. The offer surprised the PPF’s lead negotiator, who was expecting a more substantial offer from a family whose head is currently worth $3.4bn.

Read more: Greybull makes Monarch profit promise

Malcolm Weir, the PPF’s restructuring head, told City A.M.: “We thought: ‘When you’ve got something sensible to offer, come back and talk to us.’”

Weir said negotiations were hamstrung by the fact that both sides knew that if the Mantegazza’s let Monarch fail, the PPF would get nothing and still have to shoulder pension liabilities.

“It was sub-£10m for the first blush. It was a lot more than zero,” Weir said. "But when you compare to the hundreds of millions of debt that the company was being released from it just wasn’t proportionate.”

So we had to have a number of rounds of negotiations to take the figure up to something that was reasonable [and] made a real difference compared to the insolvency of that business.

The Mantegazza family did not respond to a request for comment.

RAA

Moving Monarch’s pension fund was processed through a Regulated Apportionment Agreement (RAA), an unusual process that allows otherwise insolvent firms ditch cumbersome retirement schemes in order to survive. A similar process was recently agreed by Tata Steel on the £15bn British Steel pension fund.

Frank Field, chair of the influential parliamentary work and pensions committee, has hit out at the way in which Monarch’s pension fund was cut adrift. He has also queried the final deal signed-off by the PPF.

Weir said:

We were happy on day one with Monarch that we had done a good deal because we got vastly more cash into the scheme on day one than if we had allowed Monarch to fail at that point.

Read more: Ailing Interserve calls in consultant architects of failed Monarch strategy

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