The end of Working Capital Partners

I have known the owner of WCP since the very early days and we managed to complete a small number of arrangements for clients. They were quick and efficient but now ive heard that they have recently folded.

I make a point of not dicussing specific issues regarding specific lenders but will always make overall observations. Other lenders (especially those that are new in the market) can learn from others mistakes

1. It is important to treat brokers with respect and also understand that they are (or should be) representing the client and not the lender. It is also important not to get into online fights (not with myself) over commission. Such disputes are toxic and soon get noticed
2. Adapting to the market and its developments are vital. There has to be flexibility to cope with new entrants and their technological offerings, who have parked their tanks on your lawn.
3. You need a place in the market and be able to offer something few competitors can manage or take the time to specialise in. The market is hugely diverse and there is considerable scope to do so.
4. You need a relatively settled working enviroment with low staff turnover. Constant turnover is alienating for clients and brokers
5. You need to be competitive on price

India leads the way. The UK lags behind

So PWC receive a fine but how is punishment dished out in other economies? Perhaps the Indian authorities have the right approach?

The Ministry of Corporate Affairs in India has filed a petition seeking a five-year ban for both Deloitte and BSR and Associates, a KPMG affiliate, in relation to Infrastructure Leasing & Financial Services (IL&FS)

Of course, the cases are not identical but thats not to say that recent cases such as Patisserie Valerie were not significantly worse in terms of competence (or worse) than seen in India

 

 

PWC fined. More audit “incompetence”

Its becoming a familiar story. Another “audit” where a subsequently discovered “black hole” suddenly appears.

Ive had to listen to some from the profession actually defend this malpractice. “Auditors cant be blamed” etc etc. The obvious answer to that is if they are not taking responsibility for the service which they are charging for then what are they doing?

In this case the “black hole” was £20m. This is not excusable at any level but within a business with a turnover of £100m and assets of £60m its quite ridiculous

Many will shrug their shoulders but my concerns are with those that rely on filed accounts to make credit judgements. Are we reaching the stage that with the collusion/incompetence of certain audit firms we will not be able to trust public information? That has serious consequences for the flow of credit across the economy.

 

Remember these from the High Street?

We all remember Woolworths and the failures of Maplin are fresh in our minds but do you remember these brands?

 

 

 

 

Arcadia and the landlords

As I am writing this, the vote on the future of Arcadia is up in the balance with uncertainty over whether enough landlords have agreed to rent reductions. Few will have much sympathy with either party with landlords often seen as inflexible and arrogant and Philip Green simply being Philip Green. But it should be remembered (and seemingly forgotten by Patisserie Valeries self pitying owner) that those with most to lose here are the employees and unsecured creditors. For all Green’s faults, we should wish for this to succeed.

So what is holding the landlords back? Arguably they see this with an element of “moral hazard”, whereby if they concede reductions then other retailers will demand the same effective breaches of the agreements. Fair enough but as I have written before, they are in a very weak position. Some of their sites will be more valuable than others but the overall picture is not one of retailers clamouring for high street space. The landlords will no doubt blame Arcadia and others for not sufficiently developing their online offerings to prop up the high street presence but they were not exactly using demonstrating wonderful foresight by investing or maintaining their resources in what might be described as a quickly fading asset

 

Another step towards the end of the dreaded Personal Guarantee?

 

News comes to me of a another invoice finance lender who has dropped the requirement for Personal Guarantees. This is good news and will be another drip of pressure on the remaining players in the market.

I know this is a bugbear of mine and I would certainly concede that they are necessary in certain cases but the general reasons given by lenders for this demand are simply laughable and, as remarked to me by clients in the past, a little bit insulting.

And there is still seeming little understand that these documents are natural deal breakers. Not every borrower will be entirely hostile to signing but its quite natural that the broker should have a number of alternative options and be sympathetic to the clients desires

But i still get baffled looks form those in the finance sector when I explain the emotional significance of signing such a document.

Perhaps they don’t understand that the taxpayer doesn’t routinely bail out failed businesses ?

Face to face or no deal

Recently I have been assisting a client with financing for business purchase. My role had been to seek lending against the target company’s debtors (contact me and I can explain to process in more detail ) and also his property. As is so often the case I found the relationship and the buyer was seeking my advice. I was careful not to overstep the mark and my advice was generalist rather than specific. I stuck to what I knew, which was the financing

The deal was never completed and there are a myriad number of reasons for the breakdown. Ultimately there were misunderstandings exacerbated by email and phone exchanges and looking back it was clear that a true formal negotiation never really took place. A number of parties could be blamed for this.

The key here was that it became a constant flow of conflicting information and no one was truly able to read the others intentions and beliefs. Even my suggestion for conference calls were rejected

Time and again we have to remind ourselves that there is no substitute for face to face meetings. We are generally ignorant to how much we actually read body language and rely on chemistry and more often than not genuine common ground can be found when in the same room.

 

Philip Green. Damaged goods

I have no doubt many will feel they have heard just about enough about Philip Green and would rather not spend their spare time absorbing more detail of his unpalatable life. Nor would many wish to hear much more about many of his acolytes but this is a genuinely a riveting read on many levels. Its more than just about Green. It illustrates in sordid detail the culture that has prevailed in the business and professional services world over the last couple of decades.

Green is treated fairly and actually cuts a slightly troubled figure with great talent but warped by a cold and unpleasant upbringing. To say that his mother was charmless would be very polite indeed. Other characters in the story are eye poppingly awful, not least the absolutely useless Dominic Chappell, but maybe the most severe criticism should be directed at those who should know better. Grant Thornton (the heroes of the Pattiserie Valerie audit) come out particularly badly.

There is so much more that I could add but suffice to say that even though I was very familiar with the story,  this was genuinely a riveting well written read.