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Pre pack overhaul dropped. Right or wrong?
As many of you will now know, the proposed three day “consultation period” with creditors before the commencement of a pre pack administration has been dropped by the government
This has kicked off a lot of anger from creditors and has been criticised by Philip King of the ICM and also supported by Frances Coulson of R3, the insolvency practitioners body
They both read this blog (I am pleased to say) so naturally enough I will sit on the fence
Well almost. I can certainly see the point of view that actioning a pre pack without delay will help a business to continue trading. Seamless transition does make sense but alternatively, does a three day delay make that much difference? And one thing I am unsure about is how much real power the unsecured creditors would have during thsi short window anyway?
Maybe someone could answer.
And it has to be said that it is particularly galling for unsecured creditors to be left high and dry with no input whatsoever. As a credit manager who has witnessed too many business failures at close quarters, I would definitely not claim that I always liked what I saw. Indeed one receivership handled by a very high profile top firm was…. I will stop there
On the other hand are creditors too eager to play innocent? I have said so before and will say so again but a high proportion of business failures are certainly predictable from available information. Without blowing my own trumpet too hard, I have analysed thousands of accounts and trading circumstances and will confidently say that only about one in ten collapses are a complete surprise. The majority are certainly foreseeable not just from accounts and the sector climate but also quite simply from the business news. I wonder how many creditors ignored the available information?
My biggest frustration was misrepresented balance sheets. I clearly recall a collapsed company with fixed assets on the balance sheet of £2m which had a “realisable value” of £15k. Now with a little bit of digging, that could have been foreseen (I learnt a lesson) but who signed this rubbish off?
And were they ever held to account? Maybe the recent anger is being misplaced? but taht would depend on whether the creditors are managing their credit in the first place. Not something I would always bet on
Petroplus failure
http://www.bbc.co.uk/news/business-16696749
How can an oil refinery go bust? When I first started in credit management, the oil industry was seen as gold plated. I am curious to know the background to this and will be reporting back…
Article for my friends at Orchard Growth
On overseas credit control
http://www.orchardgrowth.com/index.php
enjoy!
A shocking credit rating
A client i worked for was being pressed particularly hard for payment by a fairly major supplier. The amounts involved were not significant and my client felt that there had been a slight change in approach from the supplier, which led him to checking their credit rating
The rating had dropped from 62 to 34 (how they quantify this i dont know) and naturally he assumed they were in trouble
So I had a look
The client was very long established and produced fairly straightforward accounts. Fixed assets barely moved from year to year and it was a self contained business in a avery steady sector. There was absolutely no adverse legal or filing information and it would be surprising if there been
Why? Because the ratio of their current assets (virtually all debtors and cash) to current liabilities stood at a very healthy 3.62. There was also no long term debt
The troubling issue was that the ratio had actually increased from 3.46 the year before. Why is that troubling?
Because there are cheap and nasty credit agencies out there who cannot even properly evaluate a simple straightforward business and cause immense damage by issuing clueless ratings
The supplier was not in trouble and, in my opinion, very unlikely to be so any time soon. And before anyone asks, this agency did not have any adverse information they were not disclosing. They do not dig that deep (few do)
Perhaps reassuring my client that the supplier is simply acting within their rights (we were overdue) and perhaps a little clumsily rather than being in difficulties, is not what they wanted to hear, but it was the truth
Credit assessment is vital and too important to be left to knee jerk thought free analysis
Bond Partners disgrace
It almost beggars belief that an IP firm can go into administration. Naturally enough there is the ironic element (as with Vantis and Halliwells last year) but this would appear to be a serious case of, lets be polite here, severe mismanagement
Not only that, people i know well have taken a hit through this. Thats not amusing…
I sense this is a story which is going to run and run..
A story about a B2B business failure…
From G2link who regularly blog intelligently in B2B credit issues in the US
Briefly put, a bad debt was incurred for a substantial amount after a client kicked off a “new initiative”. The credit reports gave the go ahead and the authors conclusion is that these cannot always be relied upon
That is true in isolation but you cant form the bigger picture without them
The key lesson (and perhaps the author didn’t quite nail this) is what was the nature of the “new initiative” What drove it? Desperation or restlessness? How costly was it? And how high risk was the strategy?
The year ahead…
Perhaps because this is the grimmest month of the year (although its a beautiful day at the top of the Tate Modern where I am typing this) its all a little too much to concentrate on gloomy news, but the news from Greece is looking bad (again).
http://www.bbc.co.uk/news/business-16553532
This is probably led to the credit agencies threats to downgrade various euro states (including France….no laughing at the back) simply because of their exposure to the Greek market.
And whilst we in the UK may feel relatively relaxed about that, the difficulty is that a Greek euro exit will drive the markets to target Portugal and Ireland as the next victims
I call them victims reservedly. Its difficult to feel much sympathy for these states frankly but the derailing of the Irish recovery could be very difficult for the UK. Unlike Greece, the uk banks have considerable exposure there
I always tend towards optimism whilst others will be wallowing in gloom, but I do believe that 2012 is going to be a very significant year indeed. One way or another
Have a good one…
Retail hell but should it be?
Barratts, D2, Past times, La Senza and with Blacks seemingly likely to follow, the news from the high street is not improving but two things have sprung to my mind
Firstly, rising rents are frequently blamed for the collapses (as well as a lack of flexibility with payments of rents). I will admit that the lease property market is not one i’m overly familiar with but do they have their heads in the sand? Why are “rents rising” when high streets are emptying out? And is it better to force a client into administration and thus likely to be left with empty premises than perhaps show a little leeway? Answers please…
My second observation is that it is not just the economy that is killing these chains or indeed the internet. In truth some of the retailers are simply out of tune or not very good at delivering service. And there is in my part of the world a revival of a certain type of retailer which may well replicate across the economy
Now before going further, I do live in one of the most affluent areas of the country with a fairly highly educated population (and no comments please asking what I am doing here), but independent small chains of food retailers are thriving. Laverstock Park butchers have opened very successfuly in Twickenham (the third new butcher in the area to have opened in recent times) and the excellent Gails bakery chain thrives.
Both have targeted a market successfully and perhaps a desire to see a food based retail environment on the high street (driven a little by the revival in markets) is stronger than many imagine
Ok so what happens in Richmond upon Thames might not translate to Dagenham or Stoke on trent but it is a welcome and interesting trend
RBS saving the high street ?
A good article in the Observer which indicates that tax payer owned RBS may well have been propping up struggling high street businesses to a greater degree than generally realised
RBS decision-makers are under pressure on two fronts: politicians are accusing the bank of choking off credit, particularly for Britain’s small and medium-sized businesses, but many in the City believe RBS’s weakness is its reluctance to make unpalatable decisions, especially where a large number of jobs are at stake.
Cpcmcredit Blog 