‘Rescue’ investors who bought Comet stores for £2 ‘may walk away with £60m’

| November 4, 2012 | 0 Comments

By
Alex Hawkes and Neil Craven

17:25 EST, 3 November 2012


|

12:13 EST, 4 November 2012

The former backers of Comet are to keep the collapsed retailer’s lucrative warranties business – amid suggestions that the turnaround investors behind the company could walk away with profits of tens of millions of pounds.

The electrical goods retailer went into administration on Friday, putting 6,600 jobs at risk. But turnaround group OpCapita and its investors, who bought Comet for £2 just over a year ago, will keep Triptych, an insurer based in the Caribbean.

The Comet warranties business is understood to have contributed £30million in profits in 2011. ‘Triptych was acquired by Comet’s holding company, which is not going into administration,’ said OpCapita.

Controversial: The former backers of Comet are to keep the collapsed retailer's lucrative warranties business

Controversial: The former backers of Comet are to keep the collapsed retailer’s lucrative warranties business

A source suggested investors behind
OpCapita could make a profit of more than £60million. But a company
spokesman said it was too early to say how much profit they would make.

OpCapita’s return from the Comet deal
is likely to be controversial, particularly as the private equity
firm’s founder, Henry Jackson, owned MFI shortly before it collapsed,
managing to extract a profit for investors.

OpCapita insisted last week that
Triptych was unlikely to be profitable in future. The business holds
tens of millions of pounds of customers’ warranty premiums, set aside to
meet the cost of possible claims.

An OpCapita-backed holding company
will be one of the first to be paid out by Deloitte, administrator to
Comet, having lent the company cash and made further money available.

OpCapita investors were given a £50 million ‘dowry’ by former owner Kesa and this was loaned to Comet, which paid interest. OpCapita also said it had another £35million available, for which Comet was also charged a fee.

It is understood OpCapita might
suffer a ‘shortfall’ on its loan, but the venture capitalist is still
expected to see a profit from the process.

It said: ‘It was a low interest rate
for a company losing money when they bought it.’ It added that OpCapita
had made genuine efforts to save Comet. OpCapita also charged Comet,
which supplied white goods to Sainsbury’s, for its management of the
company.

Jackson bought MFI for £1 in 2006, boasting that the deal was a
‘success’ for investors, despite the furniture retailer collapsing with
£145million of debts within two years.
Merchant Equity Partners – later changed to OpCapita – pocketed a
windfall from the insolvency as a secured lender.

Jackson admitted some critics thought
his firm were ‘cowboys’. He said: ‘We protect ourselves and our
investors by structuring the transaction in a way that we are extremely
unlikely to lose money’.

The comments below have not been moderated.

A good job Dave was able to leak the good news last Wednesday because since then it has all been bad.

Nick
,

London, United Kingdom,
04/11/2012 17:16

So let me get this right, Dohhh, new I shouldn’t have had wine with dinner. Hope the peeps at HMRC are sober?

lazymaisy
,

reading, United Kingdom,
04/11/2012 16:56

These insurances are enforced upon the consumer as there is no option not to take these once you purchased your goods. You have to call them up on a premium rate number to cancel the insurance. So how many customers of theirs even bothered to do so. Utterly obscene when the employees get nothing at all….

ineedabailout
,

londonpavedwithgold,
04/11/2012 16:15

Since the emergency base rate of 0.5% in 2008-2009 my savings interest has taken dramatic falls. Comet is one of those retailers I have not purchased goods from for about four years.
I can understand the “repair” and/or “replace” for a “fee” may have value.

Darren
,

Essex, United Kingdom,
04/11/2012 16:01

Strange, when I worked for them, warrenties were underwriten by, Domestic and General, so covered if Comet went under.
– gblood, Sheffield, United Kingdom, 4/11/2012 10:02 Have a look in the small print of any insurance policy and you will find that it is underwritten by a third party. It’s the way that the insurance industry works to spread the risk.

John S
,

Bromley, United Kingdom,
04/11/2012 12:28

Well if the warranty buisness makes that much money, who ever takes Comet over will be setting up their own version. They certainly won’t be selling warranties to a third party to make all of the money.

Theron
,

Whitstable, United Kingdom,
04/11/2012 12:10

Poor reporting, the term Venture Capitalist does not apply here, this is distress/Vulture investor in Private Equity and I expect always knew that they would have this safety net even though Comet would go belly up. Henry knew exactly what he was doing, I suspect Kesa cut a nice deal too and will be getting some shares in the vehicle that will eventually pay out…all eating at the same trough!

Special K
,

London,
04/11/2012 11:32

Rover spring to anyones mind?.

kenhert
,

hertford,
04/11/2012 11:10

My daughter is one of many who are still arguing over an extended warranty, so seeing Comet’s new public page on Facebook made me very angry.**Welcome to our New Facebook page.
We will be opening up for business on 25/11/2012. We promise to be more effective with our services will provide our customers with an even better shopping experience.** My daughter shared her dreadful experiences with Comet customer ‘care’, on Facebook some months ago, and merely updated the page yesterday with the recent news about Comet’s demise. Several people started commenting on this old article, and soon became abusive, also liking each others post. My daughter reported the abuse to Facebook . When I looked at the public profiles of these posters they were from the same company. This company just happens to be listed on the public Comet Facebook page as ‘another member of their ‘fresh’ retail family’. How low can Comet and their new fresh retail family go?

Maatkare
,

Cardiff,
04/11/2012 10:53

As these stores that operate as shops continue to fai one major cause is that more and more of us are using them to research the model they want and then buy it on the internet at a ower pprice. if this carries on then this is a benefit you will lose altogether and we will be worse off for it as if there is litte competition the internet prices will increase.

David North Yorks
,

Thirsk,
04/11/2012 10:47

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

Leave a Reply

You must be logged in to post a comment.

Get Adobe Flash player