Deal agreed to cover unpaid tax and redundancy costs for electronic retailer’s 6,600 staff who have been left jobless
The government will take a £50m hit from the collapse of Comet, in the form of unpaid tax and redundancy costs it has agreed to pay the 6,600 staff left jobless after the collapse of the electronics chain.
Administrators Deloitte will publish a report on Monday detailing the decline of the 236-branch chain, which collapsed under £200m of losses at the beginning of November. The report will show that Comet racked up more than £30m of losses in the five months leading up to administration, following a £95m loss in the year to April 2012.
The administrators have scrutinised company accounts from the past three years, but it is thought their report will not criticise the management team, led by former Dixons chief executive John Clare.
Deloitte has divided up over £80m of assets held by Comet between the chain’s preferential creditors. Comet’s backers, Hailey Acquisitions Limited (HAL), will receive almost £50m of the £145m they are owed. The group of US and British investors bought Comet for £2 from Kesa in November 2011, in a deal arranged by private equity firm OpCapita. The identity of the investors is a closely guarded secret, but it is thought that OpCapita was among them, alongside activist investor Elliott Advisors.
Staff will also get £2.1m of holiday and back pay they are owed in full. Trade suppliers, meanwhile, will receive some of what they are owed, under a scheme that means they still own the goods they have supplied if they are not paid for them. About 85% of suppliers have claimed so-called “retention of title”, resulting in payments of about £40m from the administrators.
Unsecured creditors will, however, get nothing from the administration process. These include customers who have paid for goods that have not been delivered, landlords, and HM Revenue and Customs. The taxman is facing an unpaid bill of £26.2m in VAT and payroll taxes. On top of that, sources close to the administrators said the government has agreed to pay staff £24m of redundancy pay.
The administrators’ report is expected to detail steps taken to turn the business around over the past six months, noting that although costs were coming down, sales were declining at a faster pace.
Comet found it increasingly difficult to get goods on credit following its sale in November 2011. The administrators noted that some credit insurers – who pay out to suppliers if a retailer goes bust – stopped offering cover on the chain from that point, while others demanded higher premiums. As a result, Comet needed increasingly more money simply to get goods in store ahead of the Christmas rush.