£90m deficit is uncovered in Rok pension scheme

Rok, the self-styled ‘nation’s local builder’, was plunged into administration in November after failing to meet its financial obligations.

The firm had 3,800 employees and debts of about £360m. Only 380 jobs, including 11 in Wakefield, were saved in a deal with Balfour Beatty, which bought Rok’s social housing arm in the South and North West, as well as construction plants at Milton Keynes, Gatwick and Heathrow.

The potential pension shortfall was revealed in a progress report by administrators PricewaterhouseCoopers (PwC) which covered the period from November 8, 2010 to May 7, 2011.

Jeremy Webb, joint administrator at PwC, told the Yorkshire Post it was likely that Rok would be bailed out by the Pension Protection Fund, which guarantees only 90 per cent of the pension entitlement.

However, there is another option. The Pensions Regulator could issue a financial support direction (FSD) which would use the assets from the administration process to cover the shortfall in the retirement scheme and so give the pension scheme priority over other creditors.

At present, the pension claims rank behind those of secured creditors, the Royal Bank of Scotland, HSBC and Clydesdale, the owner of Yorkshire Bank, which have already been warned that they face a “significant shortfall” from their £73m of debts.

The unsecured trade creditors are unlikely to receive any payout.

FSDs are the subject of a legal dispute between the regulator and the administrators to Lehman Brothers and Nortel. A ruling on an appeal by administrators, which is expected to be given in October, could set a precedent for future cases.

The report said: “The outcome of this appeal will have a significant impact on the timing and quantum of distributions to all classes of creditor.”

Mr Webb added: “There is no indication that the Pensions Regulator will issue an FSD for Rok but were it to do that, it would prevent us from getting on with the administration process.”

But even if an FSD is issued, administrators may not have funds to fill the deficit. The company’s main asset is a legal claim against York-based construction firm S Harrison. Rok acquired S Harrison Construction from parent S Harrison Group for £4.8m in 2007.

The dispute was already underway when Rok went into administration. Mr Webb said PwC has been successful at the trial of the preliminary issues but as the matter is the subject of ongoing litigation it was not appropriate to disclose further details.

Rok suffered during the financial crisis, when it lost several private and public sector clients, and fell into further trouble after extreme weather conditions last year.