It has been reported that Comet has told potential buyers of the business that they will have to take on a £50 million pension fund deficit in order to buy the company.
The Telegraph reports that the pension deficit increases the likelihood that Kesa will have to pay any buyer a substantial “dowry” to take Comet off its hands. Otherwise Kesa could be forced to keep the liability on its own books, as other firms in the same position have been forced to do in the past.
Last week a handful of bidders went through to the second round, including private equity group OpCapita, which specialises in operational turnaround situations.
Comet’s sales are reportedly under pressure because of both the shrinking market the stores operate in and the large liability, which inside sources say could cost a potential buyer more than £100m. “To remove the risk of further deterioration in the deficit, you would have to sell the scheme to an insurer,” said a source. “The cost of doing that could be twice the amount of the current £50m deficit. Plus the pensions regulator would also have jurisdiction to review any deal involving the scheme,” he said.
Comet has agreed a recovery plan with the pension trustees that means it has to make £6.1m of additional annual contributions to the scheme in order to remove the deficit by 2018.
If Kesa decides to keep the pension deficit on its own books it could still have to pay a dowry to make up for future losses, including next year’s anticipated £10m loss.
However, if Comet is sold to a buyer only interested in its assets, rather than running the company as a going concern, Kesa could escape the need for a dowry. However this would likely involve asset stripping the company and Kesa has said that it does not want this to happen quite strongly as this would almsot certainly end with Comet entering admiistration at some point, but some feel that the company may not be left with much of a choice in the matter.
Buyers are still getting more financial information so insiders say it remains unclear what kind of format the sale will take.