plan for collapse of Thames Water

[b0rn2sk8]

what's more common is bad business goes bankrupt and the competition steps in to meet the need, even if that means picking up that companies assets to meet the need, the competition doesn't pay off the original companies' debt.

Erm… yes they do. What do you think happens when they buy the business assets from the liquidator. They money goes to paying the creditors of the business.

That's the fundamental flaw with private monopolies owning critical infrastructure

No, the fundamental flaw is selling profit making assets for a quick cash grab and then spiffing it up the wall on tax cuts.

 

[Sythe79]

Erm… yes they do. What do you think happens when they buy the business assets from the liquidator. They money goes to paying the creditors of the business.

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

 

[Blackjack Davy]

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

Nobody cares if they go bankrupt its not critical infrastructure. Water can't be allowed to go bankrupt and split up and sell the assets because obviously people need water supply. Like the banks its too big to fail. The US has made a similar argument for Intel ploughing money into it to prop it up it can't afford to let all chip manufacture fall into chinese state control potentially.

The real problem is selling off profitable state assets in the first place in retrospect it was a huge mistake.

 

[b0rn2sk8]

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

You’re making a straw man arguments with false equivalences which aren’t relevant.

The value of the assets is entirely dependent on what they are and the nature of them and their future revenue generating potential.

A water company which has a literal monopoly with sixteen million customers has a significant revenue generating potential and has a huge value.

This is not some defunct high street retailer where you might buy it’s dead stock for pennies on the pound which they couldn’t sell in the closing down fire sale.

 

[Sythe79]

So which is it, a free market private revenue making business, that should live or die on its own terms, or a critical infrastructure that needs government assistance ? it can't be both.

 

[arknor]

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

No they wouldn't, it would be asset stripped to pay off any debtors and then the brand sold off

like all the shareholders would agree to a 1$ sale, unless they were giving pepsi shares as compensation

 

[b0rn2sk8]

So which is it, a free market private revenue making business, that should live or die on its own terms, or a critical infrastructure that needs government assistance ? it can't be both.

I assume you are not responding to me as I’ve not made any representations to that effect.

I’ve I’ve been trying to get though to is that the government can’t just renationalise the company for nothing. They’ll have to buy the assets back from the creditors.

 

[arknor]

I’ve I’ve been trying to get though to is that the government can’t just renationalise the company for nothing. They’ll have to buy the assets back from the creditors.

it cost 7.5bn to privatise all the water companies in 1989

This is how much money thames water paid out in dividends since then

Over their 11 years of control, Macquarie and its co-investors paid out £2.8bn to shareholders, which is two-fifths of the total £7bn in dividends that Thames Water has paid between 1990 and 2022.

literally one water company paid out almost as much dividends in 32 years as the whole sell off raised... I wonder how much thames water was privatised for, could have been as little as 500m-1billion right, what a massive earner that has been...

I wonder what the total combined dividends of all water companies in England and Wales has been since 1989

I bet its at least 50-100billion the treasury missed out on thanks to the tory privatisation of our services.

how is that good value for the tax payer? especially if we have to buy them back, then pick up the cost of under investment and decades of neglect

The guardian has some really good graphs about thames water

In charts: how privatisation drained Thames Water’s coffers

Decades of underinvestment and bumper dividends have left the firm debt-laden and under investigation

www.theguardian.com

I'll post the graphs to save people a click

Spoiler: Click me for images

Spoilered to keep the thread scroll friendly

 

[Sythe79]

I assume you are not responding to me as I’ve not made any representations to that effect.

I’ve I’ve been trying to get though to is that the government can’t just renationalise the company for nothing. They’ll have to buy the assets back from the creditors.

maybe not 'nothing', literally. the land might have some sort of value as commercial wasteland that you would never get planning permission on for anything else. what do you think a waste processing plant is actually worth if you can't operate it, compared to the book value ?

How many buyers are there, out there, if they need government permission to do anything ? only as many or few as the government allow.

 

[Sythe79]

No they wouldn't, it would be asset stripped to pay off any debtors and then the brand sold off

like all the shareholders would agree to a 1$ sale, unless they were giving pepsi shares as compensation

Who wouldn't, what ?

Yes, that's what I said it, a company in crippling debt would be asset stripped by its competitors and the shareholders would have no say in the matter.

 

[arknor]

Yes, that's what I said it, a company in crippling debt would be asset stripped by its competitors and the shareholders would have no say in the matter.

Pepsi wouldnt be asset stripping the company unless they did a hostile take over.

thats not how asset stripping works for a bankrupt company
Pepsi would do chapter 11 bankruptcy protection anyway and share holders would have a say

it's such a massive global companyt that they would likely be able to restructure the business

 

[200sols]

Yes, at pennies on the pound the debt isn't wiped out, and even then only if anyone can use those assets, nobody is buying bankrupt McDonald's restaurant fixtures and fittings because they are worthless to anyone but McDonald's.

If Coca-Cola went bankrupt tomorrow with a trillion dollars of debt, Pepsi wouldn't buy them for a $1 and take on the debt, they might buy up Cola-Colas bottling plants for 5 cents on the book value tho.

Nope. They wouldn't sell assets undervalued like that without reason and in most cases its the cheap pricing means also taking on debt.

 

[200sols]

Who wouldn't, what ?

Yes, that's what I said it, a company in crippling debt would be asset stripped by its competitors and the shareholders would have no say in the matter.

Shareholders have no say here, shareholders are not bondholders. Shareholders will be wiped out. They are not the same peoples.

 

[Sythe79]

Pepsi wouldnt be asset stripping the company unless they did a hostile take over.

thats not how asset stripping works for a bankrupt company
Pepsi would do chapter 11 bankruptcy protection anyway and share holders would have a say

it's such a massive global companyt that they would likely be able to restructure the business

I don't think you understand how much a trillion in debt is

It's exactly how a bankrupt company would be treated, I don't know if I don't understand your larger point or if you don't

 

[Sythe79]

Nope. They wouldn't sell assets undervalued like that without reason and in most cases its the cheap pricing means also taking on debt.

If you're bankrupt you get no say in how much or to whom your former assets are sold to, that would be the job of the receiver

 

[200sols]

If you're bankrupt you get no say in how much or to whom your former assets are sold to, that would be the job of the receiver

'They' being the insolvency practitioner, sorry I had to spell that out for you.

You don't seem to understand people don't sell £1 of assets for 1p without reason.

 

[Sythe79]

'They' being the insolvency practitioner, sorry I had to spell that out for you.

OK, 'they' would sell for as much as they could achieve, that might be a penny on the dollar or 10.20.50, It's a buyer's market to low ball as much as possible. the receiver can't refuse to sell.

 

[Sythe79]

'They' being the insolvency practitioner, sorry I had to spell that out for you.

You don't seem to understand people don't sell £1 of assets for 1p without reason.

who decides it's worth a £1 or a penny ? 101 economics is it's not the book value, it's the buyer.

Bringing it back around, the water company can claim they have X million of on book assets, the creditors can claim they have X million in debt secured on those x million of assets. none of it matters unless someone is willing to pay that amount for them.

 

[200sols]

who decides it's worth a £1 or a penny ? 101 economics is it's not the book value, it's the buyer.

Bringing it back around, the water company can claim they have X million of on book assets, the creditors can claim they have X million in debt secured on those x million of assets. none of it matters unless someone is willing to pay that amount for them.

You'll find most of the debt is ring fenced and secured against the assets. Very complex legal structure.

 

[Sythe79]

You'll find most of the debt is ring fenced and secured against the assets. Very complex legal structure.

It's not really that complex, if you have 50 million secured on a pumping station, and they only offer for it is 1 million that's all you're getting (unless it's the government and taxpayer money in which case obviously they should just pay the full price)