You mean unsecured creditors who the company already likely couldn't afford to pay and would have lost their money regardless? It is called a pre-pack administration and that is part of the reason why it is allowed... that and the fact the business can keep some level of continuity, keep as many jobs as possible etc.. instead of simply being handed to administrators.
debenhams goes into admin
- Thread starter chrcoluk
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You mean unsecured creditors who the company already likely couldn't afford to pay and would have lost their money regardless? It is called a pre-pack administration and that is part of the reason why it is allowed... that and the fact the business can keep some level of continuity, keep as many jobs as possible etc.. instead of simply being handed to administrators.
Its the option "some of the creditors" wanted, how many shareholders wanted it? or staff?
If you dont get it after this many posts I think we best to call it a day on the discussion. My view wont change on the abuse of the administration process. This to me was abuse as it was "not" a "last resort". You talk as if only these creditors money mattered, and as if they were going to lose all of what they lent to the company if it ashley became ceo, how many of ashleys's shops have gone bust?
If you dont get it after this many posts I think we best to call it a day on the discussion. My view wont change on the abuse of the administration process. This to me was abuse as it was "not" a "last resort". You talk as if only these creditors money mattered, and as if they were going to lose all of what they lent to the company if it ashley became ceo, how many of ashleys's shops have gone bust?
The staff in a position to make a decision went along with it too and rejected Ashley’s plan.
The shareholders don’t have priority here, you don’t necessarily get to make money from a company that already can’t pay its debts! That’s just how it works.
Yes I don’t get your POV, it is quite muddled you’ve not explained why this was an abuse of the administration process.
The shareholders don’t have priority here, you don’t necessarily get to make money from a company that already can’t pay its debts! That’s just how it works.
Yes I don’t get your POV, it is quite muddled you’ve not explained why this was an abuse of the administration process.
Commissario
Presumably the administrators and management didn't think his plan was enough to make a difference, or thought he would do something that would cost the creditors money without saving the business.
You can make a fair chunk of money from buying up/taking control of a company that is on the brink of administration if you can get the creditors to accept your plan, and then once you've done that you can play financial games that might keep the company going for a while but have it still go down the pan, the trick is doing it so you get your money (and then some) back. I suspect this may be what was planned with the £200 million cash injection.
Good administrators will be watching out for that sort of thing, as iirc it was one of the things that killed various other companies off, usually by doing things like hiving off profitable parts of the company/it's assets* cheaply so they can make a profit then leave the shell of the original company with all it's debts to go bust leaving the creditors in a worse position than if they'd simply gone into a planned administration.
*IIRC that's part of what killed woolies, at one point they owned most of their stores outright (freehold on the land and building), but as a profit making exercise for the management/shareholders in the short term sold off the properties into a separate company that then charged the main company full whack for rent where previously the chain had basically only had to pay maintenance and taxes (IIRC the property side had been a division inside the main group, before being broken into it's own completely independent company).
Thank you for getting it.
I think the law is flawed when someone can effectively choose to go into admin without a need to.
I accept ashley's plan may not have worked, however the plan should have been allowed to try and fail, rather than just be rejected in favour of going into admin.
Its the same issue as when people will "choose" to go bankrupt with the intention of not honouring debts whilst they are still capable of servicing said debts.
Well the administrators themselves wouldnt have been the ones to decide to put it into admin in the first place, thats the decision I am talking about, not what happened after. Until they are appointed they would have had no involvement.
On your other points would ashley have asset stripped etc. all just to get his money back? maybe? however given he offered to invest 200 million, on top of whatever he had already invested to get his 30% stake I dont know if debenhams had 100s of millions in assets to strip, if they did I expect they wouldnt have got to this point. How do we know the new owners wont do the same sort of thing? The only thing that seems that can be speculated is ashley had a plan that the existing directors didnt like, and to prevent him from carrying out that plan they put the company into admin, the cash injection now put in by the new owners is 200million the same as what ashley offered, so the cash injection is of equal size.
To me all this isnt the main issue tho, the main issue is that I think admin should only be an action of last resort when its the absolute only immediate way to prevent a company from collapsing. I have no love for ashley or the other ex shareholders, I just hold the view that the company was not on its last legs when it had a 200 million cash injection been offered by a shareholder.
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https://www.ft.com/content/38b297b4-5b96-11e9-9dde-7aedca0a081a
1) They rejected His deal because he had ample opportunity before this to be part of the pre-pack administration team and refused to do so:
2) Due to him not being part of the admin team his offers of earlier "loans" were rejected as he is not considered a creditor
3) Despite Ashley's beliefs, Debenhams appointed highly regarded and expert teams to work through the administration, Ashley offers nothing but his "personal team"
4) Ashley wanted complete control over the company and is a much larger long term danger to the business in contrast to a professional administration team
5) Ashley has offered slowly increasing offers to "help" Debenhams £40m, £60m, £150m, £200m. It really needs its entire debt to be cleaned which is £520m. This doesn't preclude any existing loss making stores that will need to be restructured or closed too.
In conclusion, if Ashley genuinely wanted the company he could have been part of it from the beginning but refused to work alongside the other administrators by buying in. If Ashley does want the company he can probably buy it in future after the restructuring if he so wishes and makes a compelling offer.
Shareholders may have lost out, but they will have lost out anyway, allowing Ashley to take over the company wouldn't of saved the other shareholders money, it would have just allowed Ashley to rake back most of his own money through asset stripping and moving the brand names back to his home company of Sports Direct (see Dunlop etc..)
Directors will have not agreed to the buy out simply due to him wanting to fire them all, so it certainly wasn't in their interest to accept that.
Employees may be sceptical about working practices under Mike Ashley (anyone remember the Sports direct scandal a few years ago) so perhaps they wouldn't want him to take control either.
Creditors as explained above didn't want to allow Ashley to take control as he refused to be a part of their collaborative effort from the beginning and his untrustworthy and unpredictable behaviour does not generate a belief that it is going to result in a sustainable future, nor is it likely to increase the chance of them retrieving any of their debts owed.
That is three internal stakeholders and the creditors with clear reasons to reject his offers. Creditors can probably be convinced should he wish to take on the ENTIRETY of the debt and you could probably convince directors if he had a better attitude and wanted to work with them rather than fire them all.
Instead of offering such things Ashley has decided to threaten to mount a "legal challenge" because they rejected him. Not really the sort of actions of someone who is trying to work to save a company over his own self interest.
1) They rejected His deal because he had ample opportunity before this to be part of the pre-pack administration team and refused to do so:
2) Due to him not being part of the admin team his offers of earlier "loans" were rejected as he is not considered a creditor
3) Despite Ashley's beliefs, Debenhams appointed highly regarded and expert teams to work through the administration, Ashley offers nothing but his "personal team"
4) Ashley wanted complete control over the company and is a much larger long term danger to the business in contrast to a professional administration team
5) Ashley has offered slowly increasing offers to "help" Debenhams £40m, £60m, £150m, £200m. It really needs its entire debt to be cleaned which is £520m. This doesn't preclude any existing loss making stores that will need to be restructured or closed too.
In conclusion, if Ashley genuinely wanted the company he could have been part of it from the beginning but refused to work alongside the other administrators by buying in. If Ashley does want the company he can probably buy it in future after the restructuring if he so wishes and makes a compelling offer.
Shareholders may have lost out, but they will have lost out anyway, allowing Ashley to take over the company wouldn't of saved the other shareholders money, it would have just allowed Ashley to rake back most of his own money through asset stripping and moving the brand names back to his home company of Sports Direct (see Dunlop etc..)
Directors will have not agreed to the buy out simply due to him wanting to fire them all, so it certainly wasn't in their interest to accept that.
Employees may be sceptical about working practices under Mike Ashley (anyone remember the Sports direct scandal a few years ago) so perhaps they wouldn't want him to take control either.
Creditors as explained above didn't want to allow Ashley to take control as he refused to be a part of their collaborative effort from the beginning and his untrustworthy and unpredictable behaviour does not generate a belief that it is going to result in a sustainable future, nor is it likely to increase the chance of them retrieving any of their debts owed.
That is three internal stakeholders and the creditors with clear reasons to reject his offers. Creditors can probably be convinced should he wish to take on the ENTIRETY of the debt and you could probably convince directors if he had a better attitude and wanted to work with them rather than fire them all.
Instead of offering such things Ashley has decided to threaten to mount a "legal challenge" because they rejected him. Not really the sort of actions of someone who is trying to work to save a company over his own self interest.
Well it kind of was, that’s the whole point... how else were they going to pay their debts etc???
You seem to want the creditors to take a bigger hit and the shareholders to not take the loss they suffered - why should the creditors go along with that?
You seem to want the creditors to take a bigger hit and the shareholders to not take the loss they suffered - why should the creditors go along with that?
Commissario
[edit] Dowie posted at the same time[/edit]
No, if the shareholders, creditors and management consider that Administration is better for the creditors and business than letting someone get the business at a bargain rate with no clear plan or what is considered a workable one, but the creditors and management have come to an agreement that they consider as having a better chance in regards to administration, then administration is the way to go.
Remember there is a planned administration where the involved parties have worked out something they think could work and minimises losses but the correct legal route is administration, and unplanned administration (usually shortly followed by bankruptcy) where the chances are no one gets anything.
The management and creditors have to consider if an external plan is likely to be better or worse than going into planned administration, it sounds like the considered that the correct course of action in this case.
IIRC in the US it's the difference between Chapter 11 (negotiated bankruptcy with a chance they'll pull through), and chapter 7 which is normally the end.
Also typically shareholders aren't quite the same as creditors, as they've invested knowing the risk of the company losing money (although usually they'll have made more than their investment back), and creditors who have supplied goods and services. IIRC legally they are very different in terms of how the law views them, the same as HMRC and staff are treated differently (IIRC it goes staff, HMRC, secured creditors, creditors, investors or something in terms of who has priority to be paid).
No, if the shareholders, creditors and management consider that Administration is better for the creditors and business than letting someone get the business at a bargain rate with no clear plan or what is considered a workable one, but the creditors and management have come to an agreement that they consider as having a better chance in regards to administration, then administration is the way to go.
Remember there is a planned administration where the involved parties have worked out something they think could work and minimises losses but the correct legal route is administration, and unplanned administration (usually shortly followed by bankruptcy) where the chances are no one gets anything.
The management and creditors have to consider if an external plan is likely to be better or worse than going into planned administration, it sounds like the considered that the correct course of action in this case.
IIRC in the US it's the difference between Chapter 11 (negotiated bankruptcy with a chance they'll pull through), and chapter 7 which is normally the end.
Also typically shareholders aren't quite the same as creditors, as they've invested knowing the risk of the company losing money (although usually they'll have made more than their investment back), and creditors who have supplied goods and services. IIRC legally they are very different in terms of how the law views them, the same as HMRC and staff are treated differently (IIRC it goes staff, HMRC, secured creditors, creditors, investors or something in terms of who has priority to be paid).
Soldato
Who used that and what was the outcome for them by using it?
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"But it declined to take part in what it believed would be a carve-up of Debenhams."
"a major reason for not trying to sell the company as a going concern."
So by my understanding Mike Ashley was right. He wanted the stores but he could see that the investment group wanted to asset strip Debenhams instead. Debenhams senior management & the administrators weighed up the two options and decided to screw over the staff by handing it to this asset stripping investment group because they don't like Ashley (and because they and their mates make more money this way). Shame.
"a major reason for not trying to sell the company as a going concern."
So by my understanding Mike Ashley was right. He wanted the stores but he could see that the investment group wanted to asset strip Debenhams instead. Debenhams senior management & the administrators weighed up the two options and decided to screw over the staff by handing it to this asset stripping investment group because they don't like Ashley (and because they and their mates make more money this way). Shame.
Eh?
Soldato
Why do you want a successful retail business man to fail? At this point he will be the only one propping up the big stores.