Monarch Collapse: A £1 Sale Could See Fat Cats Walk Away with Millions

The Chair of the Work and Pension Committee has written to the Chief Executive of the Pension Protection Fund (PPF) querying the financial settlement for the Monarch Airlines pension scheme. The questions centre around a £7.5 million secured loan note granted to the PPF by Greybull Capital, the firm that bought Monarch Airlines for £1 in 2014, and the priority that will be given to competing interests and creditors in the fallout of Monarch’s plunge into administration on October 2^nd.

Press coverage today has raised the possibility that because of the way the buyout was engineered, the PPF may lose out entirely on its claim while Greybull – a private firm run by Marc and Nathaniel Meyohas and Richard Perlhagen – could even extract a multi-million pound profit from its investment.

Commenting, Rt Hon Frank Field MP, Chair of the Committee, said: “How can it be that once again, mega rich individuals could walk away from a collapsed company with a bumper profit while ordinary people pick up the bill? This massively supports the case for the law to change, to robustly protect pension schemes against owners seeking to line their pockets while avoiding their responsibilities, in line with our recommendations. Do we need another illustration of the ethics of some of the billionaire class in this country before we act?”

Greybull bought the ailing airline, minus the company pension scheme, for £1 from its billionaire founders the Mantegazza family October 2014.

Before the takeover the pension scheme had reportedly been carrying a deficit of £158 million.

To enable the takeover, the pension scheme was separated from the company as part of a Regulated Apportionment Arrangement (RAA) negotiated and approved by the Pensions Regulator (TPR) and the PPF in September 2014. TPR agreed to the deal as it was satisfied that Monarch would otherwise have inevitably gone insolvent within 12 months.

According to the terms of the RAA:

· The former owners made a £30 million mitigation payment into the scheme and demonstrated to TPR’s satisfaction that all other creditors to the firm had made “significant compromises” on their claims;

· Greybull gave the PPF a 10% equity stake in the new restructured business and a £7.5 million secured loan note, potentially enabling the PPF to gain from any recovery in the firm’s fortunes.

The scheme entered PPF assessment in October 2014 and was fully transferred into the fund in November 2016. Members of the Monarch scheme now receive PPF levels of pension benefit, including a 10% cut to accrued benefits for deferred members and a further compensation cap limiting payments to those with the highest accruals, e.g. the longest serving pilots. 

Image: Monarch Airlines