La Redoute et Relais Colis

The trust, a legal structure that has existed in France since 2007, is more and more frequently used in restructurings. Kering (formerly Pinault Printemps Redoute), the luxury and sportswear group, chose a trust structure to finance the guarantees to be given to La Redoute’s employees. Last December, it announced the sale of the business to management, which then announced layoffs.

What is a trust? It is a legal mechanism that has been recognized in France since 2007, in connection with which property or rights are temporarily transferred to a professional trustee. The trustee manages them in the interest of a beneficiary, and they remain separate from other assets, ensuring their safety. In the case of La Redoute, this structure protects the guarantees granted by Kering to the employees who will be the subject of the employment plan, and will therefore provide insurance for their future, even when they have been transferred to the buyer.

A guarantee for employees

“The company is responsible for the employment plan and must finance it,” explains Jean-Claude Blanquart, CFDT delegate. “The trust makes it possible to set aside the money in an account as a guarantee to the beneficiaries that they will in fact receive it, even if the seller or buyer experience difficulties.”
This trust plan had been discussed for some time between Kering and La Redoute’s unions. But it was not the first time that such a mechanism had been used in connection with a sale or a restructuring. Unlike its equivalent in English-speaking countries, the French legislature tried to ensure that in France, trusts would not be used for tax optimization. “We were expecting to use the trust as a tool for in securing financing. We were not necessarily expecting to use it in the employment context,” notes Jean-Marie Valentin, a lawyer who is an expert in trusts. In 2008, he participated in the creation of a trust when the Shell group sold its petrochemicals site of l’Etang de Berre to the LyondellBasell group. The Caisse des dépôts, one of the leaders in the sector along with Equitis, was hired to manage the trust.

A developing tool

Since then, other employment-related trusts have been used, such as in the sale of the chemical group Arkema to the Klesh group, in the purchase of the Petroplus refineries, etc. Generally speaking, this model is used by large businesses seeking to limit the reputational damage of a redundancy plan. “At first, the tool was seen as a way to convince the unions. But now, the groups sometimes come to us, hoping for peaceful negotiations or because the employees may turn to their former employer if the obligations promised are not honored,” explains Jean-Marie Valentin. “We have noticed that this tool has been used more frequently over the last few years. Today, a dozen trusts have been created in connection with employment plans or preventively, to manage future employment plans that may be created by the buyer.”

Taking future risks into consideration

At La Redoute, some also hope that this trust will take future additional departures into account. “For Kering, the trust should cover only the jobs concerned by the plan. But we fear additional layoffs in the future, since losses are still expected over the next two years,” says Jean-Christophe Leroy, the CGT delegate at La Redoute. “Kering has planned a €315 million recapitalization, but what will happen if it does not go as well as expected?” For the moment, the employment measures that the trust will guarantee are still under negotiation between Kering and the unions.