Pittards shareholders will vote on Friday, May 12, to decide whether an innovative approach to ridding itself of the overwhelming burden of pension fund debt will save the company. A 75% vote by all shareholders is required and at a series of recent meetings and mailings the company has pleaded for a ‘yes’ vote on the basis that the only alternative is total liquidation.

For the last five years Pittards, which has stuck to a policy of manufacturing leather only in the UK, has battled against a rapidly rising deficit in its pension scheme and declining turnover and profitability. Recent UK government accounting changes required the pension deficit to be placed on the balance sheet and at £34 million this eradicated all assets of the business.

With the company hitting its bank borrowing limits John Pittard, the sixth generation CEO in the 180-year-old business, left the company in September 2004, ending the family’s day-to-day involvement in the company. Under the control of the new chairman and CEO, Stephen Boyd, the company has moved quickly to develop a management contract with Ethiopian Tannery in Ethiopia and licensing agreements in Asia. The plan is to rapidly reduce dependence on UK manufacturing and build more on the company’s skills in marketing and technology.

The high dollar has been a problem for Pittards’ sales for some years but when this was exacerbated by escalating energy costs the viability of the Leeds site was undermined and the company is in the process of closing this unit. This has accelerated the reduction of UK manufacture, albeit the cost of closure has put more pressure on borrowings until such time as the site is sold.

Should the Friday 12 vote go through, the new company looks likely to return to breakeven quite quickly but the price will be high. The arrangement—a company voluntary liquidation” agreement—will leave existing ordinary shareholders with just under 10%, and allow a new Scandinavian investor to buy a majority stake-holding for £2 million. The government scheme which will take over the pension fund takes 18.5% of the business.