Buyout exec Moulton says pension woes drive deals

LONDON (Reuters) - Around a third of deals being considered by Jon Moulton's new Better Capital (BCAP.L) private equity firm are facing pension deficits that risk pushing the businesses toward insolvency.

His comments come as companies large and small are wrestling with pension schemes burdened by long-living retirees and stung by volatility of returns experienced during the credit crisis.

"Probably a third of the deals coming into Better Capital at the moment have a substantial defined pension issue," Jon Moulton, founder and managing partner of Better Capital told the Reuters Private Equity and Hedge Funds Summit on Wednesday.

"Many of the cases we are seeing are very extreme," Moulton said.

In around one in ten of the businesses Moulton's firm is considering, the pension deficit is the dominant problem among the company's woes, he said.

Better Capital is the firm Moulton founded after his acrimonious departure from Alchemy last year. It specializes in turning around distressed and struggling businesses in the UK and Ireland.

In some cases, the pension deficit is manageable within the business's operations, in other cases the only option is insolvency.

Moulton gave the example of one firm he was considering which had no room for maneuver. Adjusting the actual figures to avoid easy identification of the company in question, he cited operating profits of 5 million pounds ($7.53 million), set against a pension deficit of 150 million pounds.

"That has to be bankruptcy, just has to be," he said.

Since the onset of the credit crisis, tough trading conditions and, in some cases, limited access to capital have been the most often cited causes for businesses to go into administration or into the hands of banks through debt for equity swaps.

Last week British-listed private equity firm 3i Group (III.L) saw its fish processing business British Seafood forced into administration by a freezing up of trade credit.

Lenders this week seized control of 3i's British Garden Products and laser eye surgery business Ultralase through debt for equity swaps.

Moulton said Better Capital had some interest in the former 3i businesses but declined to comment further.

($1=.6642 Pound)

(Editing by Jon Loades-Carter)