Ministers line up £1bn cash boost for Royal Mail

[TrueBlueTerrier]

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The Government is working on a plan to inject up to £1bn into the Royal Mail to shore up its financial position ahead of privatisation, The Daily Telegraph can disclose.

The Department for Business, Innovation and Skills is looking at whether it should write off a significant amount of the Royal Mail's debts to the National Loans Fund (NLF), according to people familiar with the matter.

As well as restructuring the balance sheet, the Government is looking at whether it should take on Royal Mail's £30bn pension fund liabilities and assets. Photo:
The Department for Business, Innovation and Skills is looking at whether it should write off a significant amount of the Royal Mail's debts to the National Loans Fund (NLF), according to people familiar with the matter.

The debt is thought to date back to a restructuring almost a decade ago when the NLF lent £1.8bn to the Royal Mail.

If the Government decides to give a green light to the plan, sources said it is likely HM Treasury will either inject fresh capital into Royal Mail or pay the NLF direct to wipe out the debt. The Royal Mail is also understood to have £1bn of cash on its balance sheet sitting in an escrow fund. However, it is not known whether the Government could approve Royal Mail using that cash to pay off its debts to the NLF.

"This potential balance sheet restructuring is about making sure the Royal Mail and Government's capital is being used more efficiently," said a person involved in the situation.

A Business, Innovation and Skills spokesman said: "We are considering what support is appropriate for Royal Mail. We will be notifying the Commission on State Aid support and will come forward with further details in due course."

Last week, The Daily Telegraph disclosed how new government business plans showed that ministers are considering injecting millions of pounds of fresh public money into the postal operator, which could delay its planned privatisation,

The report said: "The complexity of the privatisation process has become more apparent since November and was caused in part by the downgrading of Royal Mail's business plan in January."

"This means that additional state aid support is required making the case more complicated. This increased complexity has pushed back the completion date."
As well as restructuring the balance sheet, the Government is looking at whether it should take on Royal Mail's £30bn pension fund liabilities and assets.

However, the Government needs to win European Union approval for the British taxpayer to take over the company's £8.4bn pension deficit. A decision from the European Union, which would pave the way for a privatisation of the Royal Mail, has now been delayed until May next year.

If the Government does decide to press ahead with a privatisation of the Royal Mail, it could take several forms, such as a flotation. A sale to a trade buyer or private equity investor is another possibility.

Private equity firm CVC, which owns a large stake in the Belgian postal service, and TNT, the Dutch postal operator, have both shown an interest in investing in Royal Mail in the past.

It is thought TNT could be willing to pay a high price for GLS, Royal Mail's profitable parcels arm. However, it is not clear whether the Government is willing to strip out and sell the division.

In March, Royal Mail announced it would cut more than 1,700 jobs, including 1,000 operational managers across the UK.

[demon]

if the have a billion sat there were the f***s our share money

[stephen500]

if the have a billion sat there were the f***s our share money

I remember Royal Mail putting a Billion pounds in to an Escrow fund. I did a bit of research and it looks to me that it is the Billion pounds that RM had to put into a fund when they agreed to "repair" our pension fund.
It looks like some one has blown the whistle on this money. Further more the government will likely say that since it is taking over the pension deficit that this fund no longer needs to be in place. So they will then take the pension pot and the billion pounds.

"The Royal Mail Pension Plan (RMPP) is a funded Defined Benefit pension scheme for employees of Royal Mail Group. Like other occupational pension schemes, the RMPP is subject to regular (triennial) actuarial valuations. The valuation of the scheme as at March 2006 showed the scheme to have a deficit of £3.4 billion. The RMPP was closed to new entrants from April 2008 and reforms were introduced to reduce the cost of accruing benefits for existing members. Royal Mail Group reached an agreement with the trustees to repair the deficit over 17 years. This included paying £1 billion pounds into an escrow account and agreeing to make deficit recovery payments of £260 million a year (index-linked) from March 2007. Despite this, the most recent actuarial valuation showed the deficit to have increased to £10.3 billion as at 31 March 2009. Royal Mail reached an agreement with the trustees to repair this over 38 years but this is subject to a formal review by the Pensions"
Source
http://www.parliament.uk/briefingpapers ... -04940.pdf