As it turns out, the list – or more accurately lists, as the administration process involves 18 individual companies – should come complete with a team of paramedics.
The numbers are, quite frankly, horrendous. Worse even than the some of the worst-case scenario imaginings.
There had been speculation that the deficit in the firm’s pension schemes could be as much as £100m. The actuality contained in the reports from administrators at Deloitte is that the combined deficit in the old Robert Horne and Howard Smith schemes is more than £180m.
It means Paperlinx will eclipse the former Polestar pension scheme for the dubious honour of being the biggest print-related scheme to enter the Pension Protection Fund (PPF).
The Robert Horne Scheme already appears on the list of ‘schemes under assessment’ by the PPF, and it seems likely the Howard Smith scheme will follow shortly.
Prior to the seismic events at its UK business, the firm had stated that it had agreed a long-term recovery plan with the UK trustees. In its last accounts, for the year to 30 June 2014, the deficit in its UK schemes had been stated at £83.3m.
In its commentary, the company said: “Importantly, a long-term recovery plan that includes cash contributions remaining at current levels has been agreed with the local trustees that will assist in avoiding adverse volatility on the cash requirements for these plans over a 20-year period.”
Individuals who are in the schemes but have not yet retired will be subject to the PPF’s £32,761 cap on annual payments, no matter what they might have been expecting to receive.
“There is a lot of angst about the pension liability,” says one former employee. “It has caused consternation.”
Whether official bodies here in the UK will pursue the Australian corporate over the pension is unclear. The Pensions Regulator has wide-ranging powers in this respect, but after a two-week wait for an answer about what would happen regarding the Paperlinx schemes, PrintWeek was informed: “We are not able to comment on individual cases.”
Paperlinx Australia did not respond to a request for comment.
The British taxpayer is picking up quite a tab, with HMRC owed the best part of £10m in VAT. While employees are owed more than £640,000 in wages and holiday pay.
Then, of course, there are the trade creditors. Across what had been the three main trading entities: Robert Horne Group, Howard Smith Paper Group and The Paper Company, trade creditors are owed some £55m.
The list of manufacturers that had supplied Paperlinx is headed by Stora Enso, owed circa £10.5m. Although it must be noted that the creditors’ information includes goods where the manufacturer or supplier had retention of title, and may have subsequently reclaimed its stock.
The Stora Enso sum is huge, but despite that it is, in the words of one paper expert “a fraction of what it would have been” had the paper giant still been trading with Paperlinx at historic levels. The papermaker had shifted strategy in spring 2014, moving its coated woodfree sheets business to a direct sales model.
And for now defunct historic papermaker Tullis Russell, the £1.2m bad debt with Paperlinx was described as “one of the straws that broke the camel’s back” by a former customer of the Fife business.
Asia Pulp & Paper, which had been expected to have a pretty substantial exposure to Paperlinx, appears to have got off lightly by comparison, in the UK at least. Its Indah Kiat Pulp & Paper and Pabrik Kertas Tjiwi Kimia businesses are owed a combined £595,000.
Among all this red ink for former suppliers to the business emerges an intriguing question: what happens regarding the remaining Paperlinx business, which is just a fortnight away from a year-end that will reflect the effects of its European exit?
As the group has repeatedly reminded us during the succession of European administrations: “Paperlinx reiterates its previous statements that the successful and profitable business operations in Australia, New Zealand and Asia have financial separation from European operations. The day-to-day businesses and operations of the ANZA region remain unchanged.”
Whether some global suppliers to the business burned by the European debacle will take a different view remains to be seen. “What will it mean regarding future supply to Paperlinx? It’s complicated,” says one executive. “The reality is, certain debts are being paid. Suppliers may choose to handle it by trading down with them.”
The only people certain to be in a rude state of health after this will be the team at Deloitte, which had clocked up £2.5m-worth of billings in the first six weeks of this hugely-complex administration.
Paperlinx UK: major creditors
Pension schemes
Robert Horne Group*: £153.4m
Howard Smith Paper Group*: £27.0m
Paperlinx UK defined contribution scheme: £191,000
Employees
Outstanding wages: £107,000
Outstanding holiday pay: £539,000
HMRC
VAT: £9.9m
Major trade creditors
Stora Enso: £10.5m
Lecta Paper: £6.1m
Arctic Paper: £2.9m
Sabic: £1.4m
Brett Martin: £1.2m
Tullis Russell: £1.2m
Avery Dennison: £1.1m
Koehler Paper Group: £1.1m
Boards24: £1m
Klockner Pentaplast: £975,000
International Paper: £905,000
Soporcel: £739,000
Mondi: £613,000
Asia Pulp & Paper: £595,000
Arjo Wiggins: £550,000
Note: trade creditor values are the aggregate values across Paperlinx’s three main UK trading entities, and includes goods where creditors are claiming retention of title.
*Defined benefit pension scheme deficit
