P&O is locked in a dispute with its pension scheme over wide discrepancies in the value of ships secured against a £146mn debt owed to the fund by the embattled ferry operator.
Grant Shapps, UK transport secretary, yesterday urged Peter Hebblethwaite, P&O chief executive, to quit after he admitted that the group had deliberately broken the law when it sacked 800 UK-based crew and replaced them with 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 Navy Ratings Pension Fund, had not paid £146mn owed to the scheme that serves about 100 groups.
P&O has indicated that the entire debt is secured by a guarantee over three of its ships — the Pride of Canterbury, Norbay and European Highlander. But according to people close to the details, P&O’s valuation of two of the ships is 40-70 per cent higher than the pension scheme’s estimates of their valuations.
A valuation of the three ships provided to the Financial Times by independent valuer VesselsValue gave them a total market price of about £45mn.
In April 2021, P&O sold two older but similar ferries, the Pride of Bruges and the Pride of York, for €5mn (£4.2mn) per ship, according to the ferry operator’s financial statements.
P&O owes the largest proportion of the £1.25bn scheme’s overall £96mn deficit, but has not made any voluntary contributions since its acquisition in 2006 by logistics business DP World, majority-owned by the Dubai Sovereign Wealth Fund. However, P&O has paid more than £80mn into the fund, which has 20,000 members, since 2016.
Guarantees are commonly used by pension trustees as a backstop in case an employer is unable to meet its obligations to a scheme.
“Assets pledged to any pension scheme as security are always important, particularly so when contributions due to the scheme may be unaffordable now or in the future,” said John Oldland, chair of trustees for the Merchant Navy Ratings Pension Fund.
“However, the valuation of any secured assets must be realistic, viewed in the context of the total sum owed.”
P&O has lost £100mn a year over the past two years and said it was not “viable” with its current staffing structure.
Hebblethwaite told MPs on Thursday that the company would make the pension repayments once its business was viable again.
“We have an agreement, and we will honour those agreements to make those repayments,” he told a parliamentary committee.
Last week, the Pensions Regulator said it was “working closely” with the trustees of the MNRPF to protect pension savers.
P&O declined to comment on the pension scheme’s debt.