The new pensions watchdog has ordered a Midland company to pay nearly £8 million into its pension fund before it goes ahead with a shares buy-back.
The amount that Sherwood Group, the Nottingham womenswear manufacturer, has been order to pay by the Pension Regulator is almost equivalent to its current market capitalisation.
The regulator has cleared Sherwood to proceed with the buy-back after agreeing to inject £7.5 million immediately and a further £240,000 by June 30 this year, the firm said in a statement yesterday .
The Pension Regulator, set up last year, has far-reaching powers to make companies honour their pension scheme obligations in the event of seeking to make major changes to their finances such as a share buy-back or takeover.
The company, which has a market cap of about £9.22 million, said its final-salary pension fund has a deficit of £745,000, according to the FRS 17 accounting standard, the statement said.
"The directors believe that the determination of the Pension Regulator is the best deal available to the company, and will now discuss these terms with major shareholders before proceeding with the share buy-back.
The company will continue working in partnership with the pension trustees in order to reduce the ongoing risks both for the benefit of scheme members and the company," the statement added.
Sherwood has restructured its businesses and now has a pile of cash to pay for its pension contributions, including £3 million from the sale of a large property holding.
