After widespread press comment in relation to published briefings from the House of Commons Work and Pensions Committee (“WPC”) on Friday 14 April 2017, Rutland Partners would like to put forward the following statement relating to its former investment in Bernard Matthews:
At all times Rutland sought to protect the future of the business, those it employed, and including those who had built up defined benefit pensions through their service. Bernard Matthews’ ongoing financial difficulties were longstanding and predated Rutland’s ownership and involvement in the business. It is regrettable for all stakeholders that we were ultimately unable to rescue the business despite over three years of hard work and investment.
Rutland has a long and established reputation in the UK market for its honesty and integrity and categorically refutes any suggestion that the outcome of our investment in Bernard Matthews was engineered to “line our pockets” as has been widely suggested in the media.
In acquiring Bernard Matthews, we risked investment where others would not and worked extensively over several years to rebuild a struggling, debt laden business in an attempt to support and secure the futures of all stakeholders including employees and pensioners.
We would like to address the briefings provided to the media claiming that Bernard Matthews deliberately chose not to accept a “buyout” offer from the Boparan Private Office preferring instead to force the business through a pre-pack administration, in order to improve Rutland’s recovery of its investment. This is factually inaccurate.
This view in particular has been developed without due consideration of the full facts and background that were provided in evidence to the WPC by Deloitte, who advised Bernard Matthews’ banks, on 23 March 2017.
The following sets out the facts in relation to the involvement of Rutland with Bernard Matthews:
2013: Rutland investment
In August 2013 Bernard Matthews was in financial difficulty and already exposed to the level of £55m debt with its existing lenders. Furthermore, the business was on stop with a number of key suppliers. The attached defined benefit pension scheme had a substantial deficit reflecting historical underfunding. Without further investment, the business would very likely have entered into insolvency and the pension fund may well have passed to the Pension Protection Fund at that stage.
Following an extensive fund raising exercise by Bernard Matthews’ advisers, there was limited interest from potential investors given the risks inherent in the business at that time. It was only following lengthy discussions that Rutland made an investment of £25m principally in a debt instrument, secured on its assets and ranking ahead of the liabilities to the pension scheme.
In high-risk situations, such instruments are not uncommon and Rutland has an obligation to its own investors to invest prudently on their behalf. Given the financial condition of the business at the time, this was the only way in which an investment in the business which safeguarded jobs and pension liabilities could have been made. All the money was used to invest in the business or reduce existing bank exposure.
This offer was considered the best option for all existing stakeholders including current and former employees, and was approved by Bernard Matthews’ Board, shareholders, advisers and the pension trustees, advised by KPMG after consultation with the Pensions Regulator.
2013-16: Rutland ownership
Rutland has worked hard since the original investment to turn the business around, has brought in experienced new management, made capital investment in agriculture and operations, invested in brand development, customer and other financial support including over £15m of additional financial support provided by stakeholders, which consists of over £9m directly from Rutland, between 2015 and 2016. At no point during Rutland’s ownership were distributions made back to Rutland.
Throughout Rutland’s ownership, Bernard Matthews maintained a regular dialogue with the pension trustees, made all agreed payments in to the fund and to the Pension Protection Fund, including when business cash flows were negative.
However, despite ongoing investment the business did not grow as expected within the UK grocer market and was seriously compromised in 2015 and 2016 by substantial reductions in the price of turkey meat in global commodity markets. This significant financial pressure resulted in negative cash flows, with the business making a loss of £26.9m for the year to 30 June 2016.
2016: Sale, refinancing and restructuring options
As reported by Deloitte to the WPC, the serious continuing cash outflows necessitated an external solution to save the business. Bernard Matthews and Rutland’s advisers explored numerous options for an outcome that protected the interests of all stakeholders. These options included a sale of the business, sale of non-core assets and refinancing. The sales process, run by PwC, who were acting on behalf of Bernard Matthews and Rutland, was an extensive exercise approaching over 40 strategic and trade parties for interest in a solvent transaction and was conducted on a global basis. In parallel extensive efforts were made to shape a restructuring which would avoid insolvency in the event that no buyer was found.
In July 2016, an offer was received from the Boparan Private Office (this is the offer referenced extensively in the media), which was one of only two offers received for the whole business. The advisors to Bernard Matthews and its key stakeholders, including Deloitte who advised the banks, did not consider that either offer represented a “solvent” solution for the business and “neither offer was capable of progression”. Deloitte has confirmed this in their written response to the WPC.
In light of the failed sale process, Bernard Matthews and Rutland and its advisers focused fully on the restructuring solution, which had support from Rutland and the Bernard Matthews banks. These plans were taken to its major customers to reassure them and gain their support. There were positive responses from a number of key customers, but some of material importance to the business indicated that they would not support the proposed restructuring and were intending to switch suppliers irrespective of any restructuring.
This lack of customer support made it impossible to pursue a restructuring of Bernard Matthews and left it without any “solvent” solution to the financial crisis it faced. Concurrently, Rutland was approached directly by Boparan Private Office with a significantly revised offer for the whole business, reflective of the imminent insolvency. This offer was itself benchmarked against other options through a full accelerated sales process run by Deloitte. This offer was accepted by the Bernard Matthews Board given the lack of any other deliverable options and the apparent security it provided to the 2,000 jobs at risk. The Boparan revised offer did not however extend to taking on the pension deficit.
At all times Bernard Matthews was independently advised on its options and the final process was one necessitating High Court approval which was secured without any objection from the pension trustees or the Pensions Regulator.
Rutland Partners very much regret that despite our substantial involvement and investment we were not able to return Bernard Matthews to a sustainable profit making business, but are absolutely clear that at all times we acted with the utmost professionalism and integrity in the conduct of our investment.