debenhams goes into admin

[The_Abyss]

yeah its these pre packs I especially hate, to me a admin should be a last resort, when there is absolutely no other options.

It shouldnt be used as a cheap means to take control of a company or a cheap means of reducing liabilities. This is the type of things that I consider as abusing the system.

Some can be questionable, but ultimately the directors and the administrators are accountable.

In this instance, it hasn't been used to take control of a company on the cheap. The debts are real, and the lenders will likely still lose out, but they're hoping to lose less. Administration does serve a purpose - I suppose you could compare it to bankruptcy. If personal bankruptcy wasn't permitted then what would be the alternative - slavery until the debt is worked off? Administration is for when the business is no longer a a viable concern, and the administrators can take over to negotiate with interested parties to try and resolve the situation. That doesn't mean that the business automatically emerges on the other side, free of debts and continuing to trade. For many, administration is the end point, everyone loses their jobs, suppliers don't get paid and the other creditors get a few pence in the pound if they're lucky.

 

[dowie]

yeah its these pre packs I especially hate, to me a admin should be a last resort, when there is absolutely no other options.

It shouldnt be used as a cheap means to take control of a company or a cheap means of reducing liabilities. This is the type of things that I consider as abusing the system.

How is it doing that? The people taking over are the creditors, if anything they're minimising their losses no?

 

[Energize]

The directors have a duty to all the shareholders, Ashley may be the biggest one (or is he just the biggest single one?), but the Directors have to consider what is the best for the all the shareholders and the business, if they believe going into a pre-agreed administration and coming out of it with one plan being better than Ashley's plan they have a duty to do it.

Putting the company into administration renders the shares virtually worthless which is the worst outcome for ALL the shareholders.

 

[chrcoluk]

The key issue for me is that it wasnt a last resort.

Shareholders and creditors both put money into the company yet it seems the shareholders were powerless and their concerns are simply swept aside for creditors?

That to me is abusing the system.

IF the shareholders were not willing to put anymore money in, and the business simply had no means to carry on trading, then that is a legitimate administration in my eyes.

 

[The_Abyss]

I think you're misunderstanding the parlous state of Debenham's finances. When the business can no longer meet its financial obligations - consider it the equivalent of you being unable to repay your mortgage debt - then there isn't really another option.

If Mike Ashley's proposal had been to buy Debenhams and repay all the debts, I'm sure that would have been very acceptable. But he wasn't offering that, i.e. he wasn't offering to put sufficient money back into the business and his plan had insufficient credibility with the creditors.

 

[chrcoluk]

I would say its the other way round, you misunderstanding me.

So I will try to explain again.

When deciding if a business goes into admin, the only concern should be if it can meet its obligations to carry on trading. e.g. debt repayments, paying bills, suppliers and so forth. If ashley's cash injection fulfilled those requirements regardless if creditors were happy or not it should have been actioned as a means to keep the business running.

In short the creditors unless they shareholders should have had absolutely zero say on the running of the business, my credit card providers who are my creditors dont tell me how to run my life, they lend me money, and as long as I pay it back there is nothing else to be said in that regard.

I understand now why the decision was made, I just dont agree with it and trying to explain what I think should be the way these decisions get made, I feel the process of entering administration is way too easy, and as I said before should be an action of last resort only, not because a creditor is unhappy with a solution.

If a law was created that required previous shareholders had to be fully reimbursed I would bet the creditors wouldnt have been so keen to follow this course of action then would they.

 

[The_Abyss]

I would say its the other way round, you misunderstanding me.

So I will try to explain again.

When deciding if a business goes into admin, the only concern should be if it can meet its obligations to carry on trading. e.g. debt repayments, paying bills, suppliers and so forth. If ashley's cash injection fulfilled those requirements regardless if creditors were happy or not it should have been actioned as a means to keep the business running.

In short the creditors unless they shareholders should have had absolutely zero say on the running of the business, my credit card providers who are my creditors dont tell me how to run my life, they lend me money, and as long as I pay it back there is nothing else to be said in that regard.

I understand now why the decision was made, I just dont agree with it and trying to explain what I think should be the way these decisions get made, I feel the process of entering administration is way too easy, and as I said before should be an action of last resort only, not because a creditor is unhappy with a solution.

If a law was created that required previous shareholders had to be fully reimbursed I would bet the creditors wouldnt have been so keen to follow this course of action then would they.

I’m not surprised that I don’t understand you, as your ‘understanding’ or the way you wished things worked is incorrect and isn’t how they work.

You say ‘as long as I pay it back’ - Debenhams couldn’t pay it back. And, in the opinion of the lenders, Debenhams directors and administrators, neither could Ashley’s proposed plan.

So you can disagree with it all you like, and you’re absolutely incorrect about one more thing too if you think that this was an easy entry into administration. The Debenhams management has been fighting Tom keep the business afloat for years.

Your point about ‘reimbursing’ shareholders makes no sense. Firstly, who would do this and secondly, that makes being a shareholder risk-free. Again, who’s going to underwrite that?

 

[dowie]

When deciding if a business goes into admin, the only concern should be if it can meet its obligations to carry on trading. e.g. debt repayments, paying bills, suppliers and so forth. If ashley's cash injection fulfilled those requirements regardless if creditors were happy or not it should have been actioned as a means to keep the business running.

In short the creditors unless they shareholders should have had absolutely zero say on the running of the business, my credit card providers who are my creditors dont tell me how to run my life, they lend me money, and as long as I pay it back there is nothing else to be said in that regard.

Your mortgage company might cut you a deal but also might decide to repossess your house if you're unable to keep up with repayments. It isn't just a decision for say you and your partner (the shareholders) to make.

I'm sure plenty of businesses with massive debts could be rescued if X amount of debt was just written off on a whim and some business man/woman could come along and run them/potentially restructure them and keep the good bits etc... why should the creditors just accept the shareholders dictating how much to write off etc..?

Some of the debt might well be secured on specific assets etc... if the company can't service that debt then it is up to the creditors whether they want to take some deal that restructures the debt and keeps the business running etc...

 

[chrcoluk]

I’m not surprised that I don’t understand you, as your ‘understanding’ or the way you wished things worked is incorrect and isn’t how they work.

You say ‘as long as I pay it back’ - Debenhams couldn’t pay it back. And, in the opinion of the lenders, Debenhams directors and administrators, neither could Ashley’s proposed plan.

So you can disagree with it all you like, and you’re absolutely incorrect about one more thing too if you think that this was an easy entry into administration. The Debenhams management has been fighting Tom keep the business afloat for years.

Your point about ‘reimbursing’ shareholders makes no sense. Firstly, who would do this and secondly, that makes being a shareholder risk-free. Again, who’s going to underwrite that?

We going round in circles, they could make payments if they took ashley's money, the failure was due to the directors actions.

I would agree if they didnt have that option, but they did have that option.

Where have the administrators said ashley's funding wouldnt be able to be used to make repayments to creditors? When they came in that funding wasnt there as the decision was already made before they came in, so why would they even be considering it.

In regards to my reimbursing shareholders. Obviously it is an imaginary scenario, as there is no such law, but in the what if scenario, I am pretty sure if the creditors were faced with a liability of having to reimburse the shareholders for their loss of shares, they would not have pushed the directors to enter into administration instead I expect they would have let ashleys proposal happen (which is what should have been done, to carry out every possible solution before administration).

There needs to be penalties for administration, big disincentives, it really absolutely should be a last resort scenario.

Now been a shareholder wouldnt be risk free, I am sure even if the shares survived, they have very likely lost value since been purchased meaning the shareholders had likely lost a lot of money already at this point. The difference would be of course they at least wouldnt have lost all their money.

The whole concept of things like bankrupty and administration doesnt sit well with me, the fact these tools can be used to remove liabilities so easily.

 

[413x]

Another nail in the coffin of the high street. Surely it will accelerate. As more shops die, people will go less and more will die.

 

[chrcoluk]

Your mortgage company might cut you a deal but also might decide to repossess your house if you're unable to keep up with repayments. It isn't just a decision for say you and your partner (the shareholders) to make.

I'm sure plenty of businesses with massive debts could be rescued if X amount of debt was just written off on a whim and some business man/woman could come along and run them/potentially restructure them and keep the good bits etc... why should the creditors just accept the shareholders dictating how much to write off etc..?

Some of the debt might well be secured on specific assets etc... if the company can't service that debt then it is up to the creditors whether they want to take some deal that restructures the debt and keeps the business running etc...

If they repossess my house they still not running my life, they just taking what the debt is secured upon which is fine.

Now in terms of debenhams, lets say the debt was secured on the business, or some assets of the business, the creditors can seize those assets if the debt is defaulted, that is fair enough, but that doesnt seem to have happened in this case, instead of seizing assets, they appeared to have had influence on the directors decisions instead which ended up in a process been followed that put the company into administration. Maybe there was also other creditors who were unsecured and of course have now likely lost all their money as well not just shareholders, customers with gift vouchers etc.

Whats interesting is in court, if a creditor takes aggressive action, but the court finds the debtor was making reasonable effort to repay the debt, the court can rule against the creditor. Ashley may well win his court case, I dont think its foregone conclusion. If he can prove his offer was sincere and had a reasonable chance of honouring the terms of the loan a court may side with him.

 

[dowie]

We going round in circles, they could make payments if they took ashley's money, the failure was due to the directors actions.
[...]

The whole concept of things like bankrupty and administration doesnt sit well with me, the fact these tools can be used to remove liabilities so easily.

You're getting a bit muddled again, in a previous post you talked about it being a cheap way to remove liabilities... again the creditors are the people the money is owed to.

If they repossess my house they still not running my life, they just taking what the debt is secured upon which is fine.

Now in terms of debenhams, lets say the debt was secured on the business, or some assets of the business, the creditors can seize those assets if the debt is defaulted, that is fair enough, but that doesnt seem to have happened in this case, instead of seizing assets, they appeared to have had influence on the directors decisions instead which ended up in a process been followed that put the company into administration.

Of course they've got influence, they're the creditors and the company can't pay its debts! They basically have taken over the business, which you say above is "fair enough" yet you're also seemingly arguing against it?

 

[chrcoluk]

They hadnt taken over the business prior to the administration, nothing was seized.

If you want an example of what an actual seize of a business is think back to the previous liverpool football club owners when the bank seized the club.

 

[Pawnless Endgame]

Another nail in the coffin of the high street. Surely it will accelerate. As more shops die, people will go less and more will die.

Yup. The average high street these days comprises of 50% empty units and the remaining units are gambling shops, pawnbrokers, charity shops, coffee shops, phone shops and social vaping. Anything new that dares to move in will last for 2 months then it's empty again.

 

[dowie]

They hadnt taken over the business prior to the administration, nothing was seized.

Eh? The administration is what is being discussed no?

 

[The_Abyss]

We going round in circles, they could make payments if they took ashley's money, the failure was due to the directors actions.

I would agree if they didnt have that option, but they did have that option.

Where have the administrators said ashley's funding wouldnt be able to be used to make repayments to creditors? When they came in that funding wasnt there as the decision was already made before they came in, so why would they even be considering it.

In regards to my reimbursing shareholders. Obviously it is an imaginary scenario, as there is no such law, but in the what if scenario, I am pretty sure if the creditors were faced with a liability of having to reimburse the shareholders for their loss of shares, they would not have pushed the directors to enter into administration instead I expect they would have let ashleys proposal happen (which is what should have been done, to carry out every possible solution before administration).

There needs to be penalties for administration, big disincentives, it really absolutely should be a last resort scenario.

Now been a shareholder wouldnt be risk free, I am sure even if the shares survived, they have very likely lost value since been purchased meaning the shareholders had likely lost a lot of money already at this point. The difference would be of course they at least wouldnt have lost all their money.

The whole concept of things like bankrupty and administration doesnt sit well with me, the fact these tools can be used to remove liabilities so easily.

You're confused, mixing reality up with things that you would like to happen.

There ARE huge penalties for administration, such as, in this case, the complete loss of share capital in the business. The shareholders have lost pretty much everything. It is a last resort scenario - that's why the directors battled so hard against it for so long.

Let's spin this around, as you're clearly not able or willing to understand. Tell us what exactly about Ashley's bid would have transformed Debenhams and made them able to meet their liabilities - of lenders and landlords. You do realise that, even as things stand now, the future of Debenhams is by no means secure. They're still struggling to pay their rent, and many stores will close and jobs will be lost.

 

[chaparral]

Another nail in the coffin of the high street. Surely it will accelerate. As more shops die, people will go less and more will die.

That also my thinking

Almost all the shops I used to go to town for have closed down now so I very rarely go into town now

 

[visibleman]

...they could make payments if they took ashley's money..

How?

But IIRC, Ashley's deal didn't involve him taking on all of the debt (total debt is £560m); rather he was offering £150m and lenders would be required to write off the same. So the business would have still had a few hundred million quids worth of debt with him at the helm and the potential for the lenders to be screwed further.

 

[Energize]

How?

But IIRC, Ashley's deal didn't involve him taking on all of the debt (total debt is £560m); rather he was offering £150m and lenders would be required to write off the same. So the business would have still had a few hundred million quids worth of debt with him at the helm and the potential for the lenders to be screwed further.

£200 million actually which is a substantial proportion of the debt and far more than the creditors will get by putting the business into administration.

The directors basically said fu to at least 30% of the shareholders by rejecting his deal.

 

[chrcoluk]

Eh? The administration is what is being discussed no?

The administrator took hold of the business not the creditors. It was then sold to the creditors for a cheapo price as they were deemed to be the most viable way forward for the business by the administrator.

Thats not a seizure by creditors, but more so a legal short cut way of acquiring control of 100% of the business whilst removing liabilities to other creditors.