On Thursday morning at the Mermaid in Blackfriars, London Oddbins' many creditors (owed more than £20 million) – ex-staff, suppliers and HMRC (Her Majesty Revenue and Customs) – will be asked to approve the CVA (Creditors Voluntary Arrangement).
Time surely to put sentiment aside and vote against the CVA. Thus forcing Oddbins into administration.
Oddbins is in terminal decline. Even if the CVA is passed where is the finance to retock the increasing empty shelves? What conditions are HMRC imposing on duty payment? Where is the staff morale after 120 were made redundant to chop Oddbins back to its 'profitable core'?
On Friday in Harpers wine & spirit Graham Holter raised some very pertinent issues:
'Oddbins suppliers are effectively being asked to finance the rescue of the business, some trade observers say – and helping to write off a £17.5 million bill for owners Simon Baile and Henry Young.'
Putting your money where your mouth is
Despite racking up debts of £20 million Simon Baile still maintains that Oddbins is a very good, solid business'. If this is the case why hasn't the parent company – Ex Cellars Investments Ltd – its shareholders and directors – Simon Baile and Henry Young – put finance into Oddbins Ltd? Are they contributing any finance now in its hour of need?
Rather than finance going into Oddbins the company has had to pay off installments on the debt incurred by Ex Cellars Investments Ltd when they bought Oddbins Ltd in August 2008. In April 2007 Oddbins had already given Nicolas UK Ltd an unsecured loan of £17.7 million as asistance to buy shares.
Rather than finance going into Oddbins the company has had to pay off installments on the debt incurred by Ex Cellars Investments Ltd when they bought Oddbins Ltd in August 2008. In April 2007 Oddbins had already given Nicolas UK Ltd an unsecured loan of £17.7 million as asistance to buy shares.
Keeping your suppliers in the picture?
From: an interview with Baile in The Drinks Business yesterday:
When asked why he had not communicated the chain’s problems to suppliers in January, Baile said: “At that point we had a strategy in place that would allow the business to improve. However, once it became clear that this was not going to happen, we had to make a decision.”
Baile doesn't spell out what the improving 'strategy in place' was, but it might have been to just gloss over the mounting debts. It would be very interesting to know what concerned suppliers have been told and promised over the past few months.
In early December 2010 Richard Verney, Oddbins respected head buyer, quit the company to 'pursue new challenges outside of the company' according to the official press release. Four months later we have heard nothing of these 'new challenges'.
Isn't there perhaps another explanation for Verney's decision to quit Oddbins. Aware of the company's increasingly parlous financial state and concerned that Oddbins might be unable to pay their suppliers for orders placed, Verney decided that enough was enough and that he could not honourably continue.
Des Cross the finance director/commercial director also left Oddbins in December.
Ex-staff as creditors: £686,231
When asked why he had not communicated the chain’s problems to suppliers in January, Baile said: “At that point we had a strategy in place that would allow the business to improve. However, once it became clear that this was not going to happen, we had to make a decision.”
Baile doesn't spell out what the improving 'strategy in place' was, but it might have been to just gloss over the mounting debts. It would be very interesting to know what concerned suppliers have been told and promised over the past few months.
In early December 2010 Richard Verney, Oddbins respected head buyer, quit the company to 'pursue new challenges outside of the company' according to the official press release. Four months later we have heard nothing of these 'new challenges'.
Isn't there perhaps another explanation for Verney's decision to quit Oddbins. Aware of the company's increasingly parlous financial state and concerned that Oddbins might be unable to pay their suppliers for orders placed, Verney decided that enough was enough and that he could not honourably continue.
Des Cross the finance director/commercial director also left Oddbins in December.
Ex-staff as creditors: £686,231
Understandably there has been a focus on wine trade debtors as well as the £8.571 million (£3.04 m in PAYE/VAT and £5.529 m in duty) owed to the tax authorities. Less attention has been paid to Oddbins staff who have been made redundant. There are at least 140 individuals on the 18 pages of debtors. If all of them are staff or ex-staff they are owed £686,231.The sums owed to individuals vary from a few pounds up to over £40,000 for some long-serving staff. At 21p to the £ they will receive £144,108 assuming the CVA proposal works.
Over the weekend I was offered the opportunity to put some qustions to Simon Baile and I duly sent them in on Monday morning. As of this evening I'm still awaiting a reply.
Please see next post for the list of questions I would want answered if I was an unfortunate Oddbins' creditor.
Under the terms of the CVA Oddbins' directors have agreed not to take any bonus payment until 2013 and to freeze their pay (£151,000 for highest paid director according to last set of filed accounts and a total of £301,000) for 18 months and only award increases in line with RPI until beginning of 2013.
Shrinking Oddbins
Shrinking Oddbins
2008 Oddbins: 158 shops. March 2011: 89 shops. August 2011: ?
2008 Ex Cellars: 2 shops. 2011: 4 shops.
The vote
With no apparent new investment going into the business accepting the CVA is surely only a short-term measure that may just build up further debt. Better to vote against and go into administration while there are still some assets left? It might also allow part/parts of the business to be sold as a going concern with some Oddbins jobs saved.
2008 Ex Cellars: 2 shops. 2011: 4 shops.
The vote
With no apparent new investment going into the business accepting the CVA is surely only a short-term measure that may just build up further debt. Better to vote against and go into administration while there are still some assets left? It might also allow part/parts of the business to be sold as a going concern with some Oddbins jobs saved.
Updated 30th March 10.50am
It appears that the estimated pay out of 13.6p cited in the CVA proposal has now been cut to 7.5p. Does this means that Oddbins is in an even more precarious state than that portayed in the CVA or is tomorrow's vote looking tight and this reduction is to help persuade creditors to vote for the CVA? **
Please see next post for the list of questions I would want answered if I was an unfortunate Oddbins' creditor.
