Retailer Comet comes crashing down to Earth as it shuts up shop
As Comet last night closed its doors for the final time in its 79-year history, recriminations over the latest high street collapse were well under way.
The failure of Britain’s second largest specialist electrical goods chain at what should be its busiest time of the year has left a string of victims in its wake – from the near-7,000 employees who have lost their jobs to the unpaid suppliers, landlords owed rent and customers with unfulfilled orders or worthless gift vouchers. Unsecured creditors are owed more than £230 million (€283 million) and have little prospect of recovering their cash.
Despite receiving more than 100 expressions of interest for all or parts of the business, administrators were unable to find a suitable buyer. The website and brand name may yet find a taker, but any deal will be at a knockdown price.
Shoppers flocked to Comet yesterday in an unsentimental search for bargains, reminiscent of the record trading enjoyed by Woolworths in its final weeks. Queues of shoppers formed outside some Comet stores but those hoping to bag an iPad or wide screen TV were disappointed: uneasy suppliers started restricting stock to the chain months ago amid fears they would not be paid, and there were few real bargains in the final hours.
Among the biggest losers in the Comet collapse, the highest-profile retail failure since Woolworths shut up shop in 2008, is the taxpayer.
Such is the state of the company’s finances, it is unable to foot a redundancy bill estimated at about £23 million, leaving the government’s redundancy payments service to pick up the tab. On top of that, Comet owes about £26 million in taxes that Her Majesty’s Revenue Customs will now be unable to collect.
It is a different story for secured creditors, principally Comet’s private equity owner, OpCapita, the self-styled turnaround specialist that took control of the loss-making company last February with a promise it would keep the business open for 18 months. The key to OpCapita’s status as a secured creditor is the way in which the purchase of Comet, for a nominal £1, was structured via a secured loan.
Run by former investment banker Henry Jackson, OpCapita also received a £50 million dowry when it bought Comet and is set to pocket the £50 million or so raised from the sale of the retailer’s stock in recent weeks.
The administrator, Deloitte, puts the total amount owed to OpCapita at £145 million, which means that, although it is still out of pocket, its rate of recovery is far more favourable than for the unsecured creditors, who have been warned they stand to recover less than 1 per cent of the money owed.
It has also emerged that the restructuring firm and its backers charged the ailing Comet little short of £13 million in financing and monitoring fees over the past nine months, which seems an extraordinary figure for a business that was trading heavily in the red.
Little wonder, then, that British business secretary Vince Cable has launched an inquiry into the Comet collapse, to be carried out by the Insolvency Service. Investigators will examine the full circumstances surrounding the company’s failure and, depending on their findings, could recommend further action.
The department for business also said it was reviewing the insolvency regulatory framework, to see if “it remains fit for purpose”. There is no suggestion of any wrongdoing in the Comet deal, but it is true that OpCapita placed itself at the head of the queue for cash in the event of a collapse.
It leaves a bitter taste for the thousands of Comet staff facing a future without jobs.
The roll call of retailers to have collapsed this year is lengthy, from fashion chain Peacocks to sports retailer JJB, Game Group and Past Times.
Further retail casualties are expected, the biggest of which could well be HMV. The retailer, which employs about 5,000 and has about 230 stores, warned last week that its sales were still falling and it expected to breach its banking covenants in the new year.
* Fiona Walsh writes for the Guardian newspaper in London