UK - Car dealership software group Kalamazoo put itself up for sale because it could not afford to pay its pension liabilities.
Chairman of the trustees Brian Redman said MFR requirements had been instrumental in the company’s decision to look for a buyer. He said: “The MFR debt became a very significant debt in terms of the company and its ability to continue to pay it.”
Last June the company gave notice to its £85m Kalamazoo Computer Group pension fund that it could no longer meet shortfall payments. A review at the beginning of last year valued the scheme at over 90% funded on the MFR basis but showed a shortfall of £7m.
This shortfall came at a time when the company was only valued at £4.2m and had just £2.5m of assets.
Redman said the size of the company had reduced over the past few years, which had contributed to the shortfall. The scheme closed to new members in 1994.
He said: “The pension scheme was a very mature scheme with many pensioners and very few actives because the company has diminished in size over the years. New money coming into the scheme is limited.”The Birmingham-based company has now agreed to be taken over by US based Universal Computer Systems.
Under the terms of the deal the pension fund liability will be fully covered before UCS takes control of the operating assets.
As part of the complex takeover, Kalamazoo has been loaned £8.6m by the Southwest Bank of Texas. Kalamazoo will take £5.2m from this to top up the fund before winding it up with the agreement of the trustees.
Kalamazoo was advised by KPMG, Wragge & Company and Deloitte & Touche for this transaction. The scheme has around 850 pensioners and 1250 deferred members.
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