High Street chain collapse sweepstake
Is there really any chance of BHS recovering from debts of £1.3 BILLION?
No, absolutely not.Whataday wrote:Is there really any chance of BHS recovering from debts of £1.3 BILLION?
No. Solvency and debt levels are not the same thing.JAS84 wrote:Hang on, if they owe that much, shouldn't they already be bankrupt?
They're solvent as long as they can juggle things enough so that they don't default on the their debts (or successfully renegotiate/refinance before that happens). In much the same way that someone with 5 maxed credit cards who can't afford to pay them off is still solvent as long as they can afford to make the minimum monthly payments and so is still notionally servicing their debts.JAS84 wrote:If they can't pay it back, how can they be considered solvent?
The problem will come when they inevitably hit a brick wall and end up in administration.
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bilky asko
- Posts: 1447
- Joined: Sat 08 Nov, 2008 19.48
The key words being "on demand". They're insolvent if they can't pay a debt on demand.JAS84 wrote:If they can't pay it back, how can they be considered solvent?
Looks like BHS will finally fall this week.
http://www.bbc.co.uk/news/business-36123444
"A simmering feud between Green and Chappell is understood to have boiled over last week, when the tycoon refused to back a crucial £60m refinancing. It is understood that Green would not relax the terms of a charge he holds over the ailing chain’s assets, meaning BHS was unable to secure a lifeline from specialist lender Gordon Brothers … Green, 64, is said to have lost patience with Chappell, 49. The unravelling of BHS has embarrassed him and tarnished his reputation as king of the high street".
http://www.bbc.co.uk/news/business-36123444
Also being reported in the Sunday Times, that "sportswear giant’s arrival as a potential white knight came after a power struggle between Dominic Chappell, BHS’s owner, and Topshop tycoon Sir Philip Green".UK retailer BHS could file for administration as early as Monday, threatening 11,000 jobs, the BBC understands.
Sources close to the owners told the BBC that "things don't look good".
Talks are continuing with Sports Direct to buy some of BHS's 164 stores but it is understood any buyer would only do so if it did not have to take on its £571m pension deficit.
"A simmering feud between Green and Chappell is understood to have boiled over last week, when the tycoon refused to back a crucial £60m refinancing. It is understood that Green would not relax the terms of a charge he holds over the ailing chain’s assets, meaning BHS was unable to secure a lifeline from specialist lender Gordon Brothers … Green, 64, is said to have lost patience with Chappell, 49. The unravelling of BHS has embarrassed him and tarnished his reputation as king of the high street".
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scottishtv
- Posts: 763
- Joined: Thu 01 Apr, 2004 15.36
- Location: Edinburgh
The full Sunday Times article:
BHS on brink as rescue talks fail
- Chain may go under in days after pension debt scuppers Ashley deal
- by Oliver Shah
BHS is set to fall into administration this week, putting 11,000 jobs at risk, after desperate attempts to secure a rescue from Sports Direct stalled yesterday.
The sportswear giant’s arrival as a potential white knight came after a power struggle between Dominic Chappell, BHS’s owner, and Topshop tycoon Sir Philip Green.
Green sold BHS for £1 to two-time bankrupt Chappell last year and remains one of its biggest lenders. Last week he refused to back a last-ditch cash injection lined up by Chappell, dismissing it as inadequate. The stand-off is likely to tip BHS into administration.
Green has called in the restructuring firm Duff & Phelps to handle the insolvency. Duff & Phelps’s team is being led by Philip Duffy, an insolvency veteran who worked on the closures of MFI and Borders.
An administration of the department store would put more than 160 shops in danger, making it the worst high street crisis since Woolworths went bust in 2008. As well as thousands of staff, it would hit landlords, suppliers and lenders such as private equity firm Grovepoint.
Last month BHS struck a deal with creditors and landlords to give some respite on property costs. Its debts now total about £1.3bn, with almost half relating to the gaping hole in its retirement scheme, which is likely to be bailed out by the state-backed Pension Protection Fund (PPF).
A simmering feud between Green and Chappell is understood to have boiled over last week, when the tycoon refused to back a crucial £60m refinancing. It is understood that Green would not relax the terms of a charge he holds over the ailing chain’s assets, meaning BHS was unable to secure a lifeline from specialist lender Gordon Brothers.
Green “would have been more than happy to back a realistic proposal from any lender, but this was not it”, said a source close to his Arcadia retail empire. The source added that proceeds from property sales promised by Chappell had come in at £50m less than forecast, leaving BHS’s finances in tatters.
Duff & Phelps had been due to announce the administration on Friday morning, sources said, but had to postpone the move after Sports Direct emerged as a potential saviour.
Talks with the chain, led by the billionaire Newcastle United owner Mike Ashley, continued through Friday night but foundered on BHS’s pension black hole. The Arcadia source said it would have supported a Sports Direct rescue had the pensions issue not proved insurmountable. Arcadia has £100m of annual sales through BHS concessions.
The timing of BHS’s crisis is surprising given that last month the retailer secured the backing of 95% of creditors for hefty rent cuts.
Green, 64, is said to have lost patience with Chappell, 49. The unravelling of BHS has embarrassed him and tarnished his reputation as king of the high street.
Shortly after Chappell’s consortium, Retail Acquisitions, bought BHS in March last year, The Sunday Times revealed that he had been made personally insolvent several times and had been introduced to the deal by Paul Sutton, a convicted fraudster. The Sunday Times reported how Chappell adopted a lavish lifestyle while BHS struggled. He has paid himself a salary of almost £540,000, bought a new Range Rover and two yachts, and taken holidays in Kitzbühel in Austria and the Bahamas.
Retail Acquisitions borrowed £8.4m from BHS after the takeover, which it said was to cover “professional fees” to third parties. Chappell later admitted lending £1.3m from Retail Acquisitions to a company linked to his father, to pay off the mortgage on the older man’s house. He said it had been “unanimously agreed at board level” and that some money had been repaid.
Tensions rose between BHS’s management team and Chappell last month when it emerged he had sent more than £1m of the proceeds of two property deals directly to Retail Acquisitions rather than BHS. Retail Acquisitions said the payments were “entirely in accordance with a management services agreement between the two companies”, and the sum involved was “significantly less” than £1m.
Meanwhile, Green has faced intense criticism for selling BHS without making a big contribution to its £571m pension deficit. The billionaire, who paid more than £400m of dividends from BHS to his wife, Tina, in the tax haven of Monaco during his 15-year ownership, is being pursued by the Pensions Regulator for a payment. He has so far offered £80m, which has not been accepted.
John Ralfe, a pension consultant, said administration would speed up the transfer of BHS’s 20,000 savers into the PPF. About 13,000 face cuts of at least 10% to their benefits.
BHS on brink as rescue talks fail
- Chain may go under in days after pension debt scuppers Ashley deal
- by Oliver Shah
BHS is set to fall into administration this week, putting 11,000 jobs at risk, after desperate attempts to secure a rescue from Sports Direct stalled yesterday.
The sportswear giant’s arrival as a potential white knight came after a power struggle between Dominic Chappell, BHS’s owner, and Topshop tycoon Sir Philip Green.
Green sold BHS for £1 to two-time bankrupt Chappell last year and remains one of its biggest lenders. Last week he refused to back a last-ditch cash injection lined up by Chappell, dismissing it as inadequate. The stand-off is likely to tip BHS into administration.
Green has called in the restructuring firm Duff & Phelps to handle the insolvency. Duff & Phelps’s team is being led by Philip Duffy, an insolvency veteran who worked on the closures of MFI and Borders.
An administration of the department store would put more than 160 shops in danger, making it the worst high street crisis since Woolworths went bust in 2008. As well as thousands of staff, it would hit landlords, suppliers and lenders such as private equity firm Grovepoint.
Last month BHS struck a deal with creditors and landlords to give some respite on property costs. Its debts now total about £1.3bn, with almost half relating to the gaping hole in its retirement scheme, which is likely to be bailed out by the state-backed Pension Protection Fund (PPF).
A simmering feud between Green and Chappell is understood to have boiled over last week, when the tycoon refused to back a crucial £60m refinancing. It is understood that Green would not relax the terms of a charge he holds over the ailing chain’s assets, meaning BHS was unable to secure a lifeline from specialist lender Gordon Brothers.
Green “would have been more than happy to back a realistic proposal from any lender, but this was not it”, said a source close to his Arcadia retail empire. The source added that proceeds from property sales promised by Chappell had come in at £50m less than forecast, leaving BHS’s finances in tatters.
Duff & Phelps had been due to announce the administration on Friday morning, sources said, but had to postpone the move after Sports Direct emerged as a potential saviour.
Talks with the chain, led by the billionaire Newcastle United owner Mike Ashley, continued through Friday night but foundered on BHS’s pension black hole. The Arcadia source said it would have supported a Sports Direct rescue had the pensions issue not proved insurmountable. Arcadia has £100m of annual sales through BHS concessions.
The timing of BHS’s crisis is surprising given that last month the retailer secured the backing of 95% of creditors for hefty rent cuts.
Green, 64, is said to have lost patience with Chappell, 49. The unravelling of BHS has embarrassed him and tarnished his reputation as king of the high street.
Shortly after Chappell’s consortium, Retail Acquisitions, bought BHS in March last year, The Sunday Times revealed that he had been made personally insolvent several times and had been introduced to the deal by Paul Sutton, a convicted fraudster. The Sunday Times reported how Chappell adopted a lavish lifestyle while BHS struggled. He has paid himself a salary of almost £540,000, bought a new Range Rover and two yachts, and taken holidays in Kitzbühel in Austria and the Bahamas.
Retail Acquisitions borrowed £8.4m from BHS after the takeover, which it said was to cover “professional fees” to third parties. Chappell later admitted lending £1.3m from Retail Acquisitions to a company linked to his father, to pay off the mortgage on the older man’s house. He said it had been “unanimously agreed at board level” and that some money had been repaid.
Tensions rose between BHS’s management team and Chappell last month when it emerged he had sent more than £1m of the proceeds of two property deals directly to Retail Acquisitions rather than BHS. Retail Acquisitions said the payments were “entirely in accordance with a management services agreement between the two companies”, and the sum involved was “significantly less” than £1m.
Meanwhile, Green has faced intense criticism for selling BHS without making a big contribution to its £571m pension deficit. The billionaire, who paid more than £400m of dividends from BHS to his wife, Tina, in the tax haven of Monaco during his 15-year ownership, is being pursued by the Pensions Regulator for a payment. He has so far offered £80m, which has not been accepted.
John Ralfe, a pension consultant, said administration would speed up the transfer of BHS’s 20,000 savers into the PPF. About 13,000 face cuts of at least 10% to their benefits.
A pretty sorry tale of some of the worst extremes of capitalism.
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scottishtv
- Posts: 763
- Joined: Thu 01 Apr, 2004 15.36
- Location: Edinburgh
The fact Chappell is so detached amazes me, referring to the company as "the BHS project" and "one I'll never forget".
Oh well... Sorry about your pensions, and do hold your heads high please. Bye!
Oh well... Sorry about your pensions, and do hold your heads high please. Bye!