Board considering administration after negotiations with pension regulator failed last month
Shares in textile firm Dawson International have been suspended pending a decision by its board on its ability to continue trading.
Dawson reported last month its negotiations had collapsed with the Pension Protection Fund (PPF), with which it had been trying to gain protection against insolvency over its estimated £50 million pension deficit.
The Dawson board applied to the PPF in May to have its pension fund enter into the protection scheme in return for a cash payment, loan note and equity stake in the company.
The pension regulator refused to do a deal with Dawson, believing it would get a better overall return if the group went into insolvency.
Explaining the PPF decision last month, Richard Williams, the regulators head of corporate affairs, said: ‘If a company were to go bust we would make a recovery through the insolvency process.
“But in order for us to do a deal has to clearly give us a bigger return than we would get if it went into insolvency in the normal way.
‘In their statement their chairman says 'we believe that our proposal provided significantly better, guaranteed returns than insolvency', I would characterise this as a matter of opinion.”
The company's share price slumped more than 40 per cent on that news.
Investor Jan Holmstrom also resigned from his position on the board as non-executive director after negotiations broke down with the PPF.
Hawick-based Dawson, which used to own the Pringle knitwear brand, had a global workforce of 12,000 at its peak, but has drastically cut back staff since 1998 and now has fewer than 60 active members in its pension scheme, with 3,500 deferred members.
In its most recent accounts, covering a 15-month reporting period to April, the company posted a £3.5 million pre-tax loss.
The 140-year-old company warned last month 200 jobs were at risk at its Barrie mill in Hawick after failing to secure a deal with the PPF which left it no alternative but to consider appointing administrators for all or part of the group.
Dawson offloaded its home furnishings business, Dawson Home Group Limited, in May 2011 in £6.5 million deal in a bid to reduce costs and further streamline the company.
In the past three years, Dawson also offloaded the Todd and Duncan spinning mill at Kinross to Chinese cashmere giant Zhongyin in a £6.1 million deal and the Dorma bedlinen business in a £5 million deal to Dunelm Group.
Dawson's US knitwear subsidiary Dawson Forte is reported to be “well funded and continues to trade normally”.