Pension fears threaten to derail sale of Comet

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The chances of Kesa Electricals selling Comet, its ailing UK chain, appear to be receding, despite today being the day for final bids.

Opcapita, the private equity firm, and Hilco, the retail restructuring specialist, are still interested in acquiring the 249-store retailer but the pension liabilities of loss-making Comet remain a major stumbling block.

Comet has a pension deficit of £40.7m, but the pension trustees calculate this based on the strong finances of Kesa, the pan-European group that also owns the Darty chain in France, and Kesa's ability to meet its funding obligations.

If Kesa sold Comet, the pension trustees and the pension regulator, would therefore require a much bigger commitment to protect the UK retailer's scheme, as it would be deemed a riskier entity as a standalone company.

In the event of a sale going through, there is also a chance that Kesa would have to continue contributing to Comet's pension fund.

Compounding this problem is the fact that analysts forecast Comet could double its losses to £20m this financial year, amid a deep downturn for the UK electricals sector. A new buyer would also have to provide considerable working capital to ease the concerns of suppliers.

While the pension deficit remains the key barrier, all these factors combined mean that Kesa may have to pay a dowry to a potential buyer of more than £150m.

As a result, Kesa may decide it is more prudent for its balance sheet to hang on to Comet and try to turn around its performance. However, the parent will not take a decision on Comet until it has examined the final bids. Kesa, Hilco and Opcapita declined to comment.