Phones4U in administration
Discussion
Fidgits said:
Excellent! 
soad said:
Fidgits said:
Excellent! 
so is this true?
http://www.telegraph.co.uk/men/thinking-man/111098...
in which case how is it legal especially when they owe tax? can they do it to any company?
http://www.telegraph.co.uk/men/thinking-man/111098...
in which case how is it legal especially when they owe tax? can they do it to any company?
petemurphy said:
so is this true?
http://www.telegraph.co.uk/men/thinking-man/111098...
in which case how is it legal especially when they owe tax? can they do it to any company?
From what I have seen of the Phones4u accounts that article is utter bhttp://www.telegraph.co.uk/men/thinking-man/111098...
in which case how is it legal especially when they owe tax? can they do it to any company?
ks.It did not go into administration because of debt, but because of no product to sell going forwards.
If its accounts are anything to go by, administration should see all creditors including HMRC get paid in full.
I am no accountant but nothing that I have read supports the statements in that article.
They have debts of £600 million.
These were sustainable because they were a profitable business, but a certain percentage of every new connection went to pay off debts (hence Voda saying that there was no room for negotiation because of the debts)
They have no assets, apart from what stock is left, which is worthless to P4U and will sold cheaply. I would imagine rent is owed on lots of shops and am sure the timing of the administration was very key to not paying rent.
Lots of people will lose out and hopefully a lot of shop staff will be re-employed
These were sustainable because they were a profitable business, but a certain percentage of every new connection went to pay off debts (hence Voda saying that there was no room for negotiation because of the debts)
They have no assets, apart from what stock is left, which is worthless to P4U and will sold cheaply. I would imagine rent is owed on lots of shops and am sure the timing of the administration was very key to not paying rent.
Lots of people will lose out and hopefully a lot of shop staff will be re-employed
blindswelledrat said:
From what I have seen of the Phones4u accounts that article is utter bks.
It did not go into administration because of debt, but because of no product to sell going forwards.
If its accounts are anything to go by, administration should see all creditors including HMRC get paid in full.
I am no accountant but nothing that I have read supports the statements in that article.
Doesn't the fact that the 'investors' effectively saddled it with a 100% mortgage (and the repayments) meant that it needed to be able to afford those repayments going forward (which it had never had to do before). ks.It did not go into administration because of debt, but because of no product to sell going forwards.
If its accounts are anything to go by, administration should see all creditors including HMRC get paid in full.
I am no accountant but nothing that I have read supports the statements in that article.
Hence, it's commercial terms were far less desireable to the operators than before? Hence, why they pulled out? To my lay pidgeon knowledge this effectively seems like a leveraged takeover much along the lines of Man Utd.
hornetrider said:
Doesn't the fact that the 'investors' effectively saddled it with a 100% mortgage (and the repayments) meant that it needed to be able to afford those repayments going forward (which it had never had to do before).
Hence, it's commercial terms were far less desireable to the operators than before? Hence, why they pulled out? To my lay pidgeon knowledge this effectively seems like a leveraged takeover much along the lines of Man Utd.
I can only see accounts up to December 2012 which show a net worth of 375 million (assets minus liabilities). I don't know the makeup of any of that (or indeed how the parent company fits in to that) but if they were still the same when they went into administration I don't see how creditors would be much out of pocket.Hence, it's commercial terms were far less desireable to the operators than before? Hence, why they pulled out? To my lay pidgeon knowledge this effectively seems like a leveraged takeover much along the lines of Man Utd.
THe £200million I read about being paid to the venture capitalists were in the form of bonds/shares so wouldn't come out of that figure.
Like I said, I don't know that much about it but I certainly haven't read anything that suggests noone will be paid apart from that Telegraph article, and as we all know the Telegraph is the new Daily Mail
Here is an article which explains the timeline a bit better
http://www.thesundaytimes.co.uk/sto/business/Tech_...
http://www.thesundaytimes.co.uk/sto/business/Tech_...
SydneyBridge said:
Here is an article which explains the timeline a bit better
http://www.thesundaytimes.co.uk/sto/business/Tech_...
Looks interesting. Can you C&P it as we non-subscribers can't see it.http://www.thesundaytimes.co.uk/sto/business/Tech_...
The sudden death of Phones 4U
How could a profitable retailer be wiped out so quickly? We investigate the demise of the mobile phone chain
Oliver Shah Published: 21 September 2014
Comment (3)
Print
On a sunny day in August last year, a senior deal-maker from the private equity firm BC Partners went to visit the boss of Dixons at the high street electrical retailer’s headquarters in Hemel Hempstead, Hertfordshire.
The atmosphere was convivial. Stefano Quadrio Curzio oversaw BC’s investment in Phones 4u, the mobile phone chain that had 160 concessions in branches of Dixons-owned PC World and Currys.
Sebastian James, Dixons’ Old Etonian chief executive, suggested the next step in their partnership could be for his company to buy Phones 4u.
James said he had a few things to fix first — including jettisoning Dixons’ struggling French business Pixmania and its Turkish division, Electroworld — but indicated he might be ready to table an offer within 18 months.
Trading at Phones 4u had been strong. There were a few small clouds on the horizon: the year before, it had dropped the mobile network 3 and in February O2 had asked it to stop signing up new customers.
Nonetheless, sales had risen 17% to £1.1bn in the year to December 2012 and underlying earnings were up 6% at £132m. It had snatched market share from rivals by opening stores and improving its website.
BC sold the wholesale part of Phones 4u’s insurance operation later that month. In a show of confidence that now looks hubristic, the private equity house loaded the company with high-interest payment-in-kind (Pik) notes and paid itself a £220m dividend. BC recouped its original investment plus a 30% return.
The business was attractive enough to whet Dixons’ appetite then. Barely more than a year later, Phones 4u has collapsed into administration.
The rapid demise shocked the retail world last weekend and left 5,600 staff in limbo as 720 branches were shuttered. The once-mighty middleman of the mobile phone industry turned out to have been undone at lightning speed by Dixons’ merger with Carphone Warehouse and the exit of Vodafone and EE as suppliers.
The recriminations began as the events leading to the disaster were publicly dissected.
Quadrio Curzio accused Vodafone of severing its contract in a way that “appears to have been designed to inflict the maximum damage to their partner of 15 years, giving Phones 4u no time to develop commercial alternatives”.
Vodafone hit back, accusing BC of burdening the company with excessive debt and leaving the management team “little commercial flexibility” to negotiate a new contract.
John Caudwell, Phones 4u’s founder, who netted £1.5bn when he sold out in 2006, had few kind words for either. The 61-year-old said the networks’ behaviour was “collusive and utterly ruthless” and that BC’s dividend had “weakened [Phones 4u’s] balance sheet and loaded it with debt”.
On Friday, Vodafone pounced on 140 stores, saving 900 jobs. As Dixons Carphone and EE continue to circle the company’s carcass with a view to picking off the best stores, those recriminations are likely to turn into legal threats.
Lawyers for BC at Dickson Minto are understood to be exploring whether the mobile networks could be accused of collusion for the way they pulled the rug from under Phones 4u. “It looks as if they are cynically trying to pick up the pieces on the cheap, having pushed it over the edge,” said one person close to the process.
Several bondholders who invested in its debt plan to sue BC and the management team for what they see as unrealistically optimistic statements about its financial health. Blue-chip fund managers including BlackRock, Alliance Bernstein and Fidelity International lent Phones 4u a total of £635m. They are likely to lose most of it.
“This is the most significant event in the history of European high yield,” said one senior bondholder. “There has not been a precipitate loss of value like this since Enron, so it’s extremely, extremely meaningful . . . It’s a total assassination by the networks but we also expect everyone to fulfil their obligations and there’s very strong evidence that BC and management did not fulfil their duties of care.”
BC BOUGHT Phones 4u in 2011 from rival Providence Equity Partners. It was one of the last deals led by Andrew Newington, who oversaw BC’s tangled buyouts of Fitness First and Foxtons before leaving for a break in Australia with his family last year.
The idea was to capitalise on Phones 4u’s popularity with under-25s by opening more stores and offering more tech accessories. The deal was predicated, in private equity parlance, on a “roll-out story”.
The first sign of trouble came last January, when O2 pulled out of Phones 4u. The network said it was a commercial decision based on the fact that Phones 4u accounted for only 8% of its contract sales.
A month later news leaked that Carphone Warehouse and Dixons were planning to merge. About the same time, BC wrote down the enterprise value of Phones 4u by 6%. The level of debt the company was carrying magnified the impact on BC’s equity stake, which shrank from £40m to £8m.
Insiders said the revaluation was a standard quarterly exercise based on the performance of listed rivals and the direction of underlying earnings. Still, observers rightly pointed out the Dixons Carphone combination would no longer need Phones 4u’s 160 concessions.
Against this backdrop the retailer’s management, led by David Kassler and Tim Whiting, started negotiating a renewal of Vodafone’s supply contract. According to people close to the talks, executives at the network “went out of their way” to reassure Phones 4u it was still their preferred retailer.
On June 10, a senior Vodafone executive, Cindy Rose, emailed Kassler to say she was confident of getting a deal signed off by Vittorio Colao, Vodafone’s chief executive, and Philipp Humm, its regional boss. On July 8, Vodafone’s British arm sent a presentation to its American headquarters describing Phones 4u as its “partner of choice”.
At the same time an investment banker friendly to BC was trying to persuade Colao he should buy Phones 4u outright. In June, Colao bumped into EE’s boss, Olaf Swantee, at a Founders Forum event at the five-star Grove hotel near Watford. They discussed taking over the company together.
Vodafone and EE took a cursory look at Phones 4u but the idea faded. Then, in mid- August, Rose delivered the knockout: as part of Project Spring (a plan to reduce the range of shops through which it sells contracts) Vodafone had decided to pull out of Phones 4u. She sent the message while on holiday at Disneyland in Florida. The email sparked panic. Kassler begged Rose for more time to put together a counter-proposal.
The two sides met on August 27. Rose told Kassler the commercial details of the contract were no longer relevant: Project Spring was about streamlining distribution, not improving margins. Kassler pleaded for another 48 hours.
Two days later he made her a remarkable offer: Phones 4u would let Vodafone dictate whatever terms it liked — and take control of the company’s most profitable stores. It was a desperate ploy.
Vodafone still said no. Sources close to the network said BC had hobbled Phones 4u by “stripping it bare” and piling it with debt, leaving Kassler and Whiting no room to manoeuvre until it was too late.
On September 1, Kassler and his senior team explained the news on a conference call with distraught bondholders. One accused the board of having been blindsided by Vodafone; another said BC had turned itself into a “sitting duck” owner by taking its money out.
Kassler insisted customers “are almost never coming in looking for a particular network” but admitted that if they sensed “we were unable to provide choice of any description, and all you are doing is putting it all on the same network, clearly that’s less attractive than someone who can provide a wide degree of choice”.
AT THE time, Phones 4u was in the process of trying to extend its supply contract with EE, parent of the Orange and T-Mobile brands and its last remaining big network.
At first EE was supportive about Vodafone’s exit, according to people close to the talks. Then it went silent.
On September 10, EE sent an aggressively worded legal letter to Phones 4u alleging contract breaches. Two days later, at the close of business on Friday, EE told Phones 4u it planned to walk away after its contract expired next Septem–ber. The game was up. Lawyers insisted its directors put the company into administration.
Founder: John Caudwell, with partner Claire, sold the firm for £1.5bn (Rex Features) One onlooker speculated the networks’ timing was influenced by the imminent launch of the iPhone 6 — they wanted to capture the appealing profit margins themselves rather than hand some to Phones 4u.
Caudwell warned that Dixons Carphone, the last middleman of any scale, should now be looking over its shoulder. “Unless they do something to insulate themselves from these networks, the writing’s on the wall,” he said.
Sources close to Dixons Carphone insisted it was too important a channel for the networks to neglect.
Phosphorus Jersey, the offshore company through which BC owned Phones 4u, issued a statement saying it was “devastated” by the collapse. It urged bondholders to form a committee and get in touch.
Some were unconvinced of the private equity firm’s sincerity. Having tried and failed to keep Phones 4u alive with a debt-for-equity swap mooted by the law firm Brown Rudnick, they feel bruised.
“That money they took out [through the dividend] belongs to creditors,” one said. “I don’t care what disclosures they made when they took out that Pik note; there’s no question they have behaved in a highly conflicted way.
“It just seems outrageous that a high street retailer with £1bn of revenues and £100m of profits would go into administration in two weeks with no warning.”
Comment (3)
Print
How could a profitable retailer be wiped out so quickly? We investigate the demise of the mobile phone chain
Oliver Shah Published: 21 September 2014
Comment (3)
On a sunny day in August last year, a senior deal-maker from the private equity firm BC Partners went to visit the boss of Dixons at the high street electrical retailer’s headquarters in Hemel Hempstead, Hertfordshire.
The atmosphere was convivial. Stefano Quadrio Curzio oversaw BC’s investment in Phones 4u, the mobile phone chain that had 160 concessions in branches of Dixons-owned PC World and Currys.
Sebastian James, Dixons’ Old Etonian chief executive, suggested the next step in their partnership could be for his company to buy Phones 4u.
James said he had a few things to fix first — including jettisoning Dixons’ struggling French business Pixmania and its Turkish division, Electroworld — but indicated he might be ready to table an offer within 18 months.
Trading at Phones 4u had been strong. There were a few small clouds on the horizon: the year before, it had dropped the mobile network 3 and in February O2 had asked it to stop signing up new customers.
Nonetheless, sales had risen 17% to £1.1bn in the year to December 2012 and underlying earnings were up 6% at £132m. It had snatched market share from rivals by opening stores and improving its website.
BC sold the wholesale part of Phones 4u’s insurance operation later that month. In a show of confidence that now looks hubristic, the private equity house loaded the company with high-interest payment-in-kind (Pik) notes and paid itself a £220m dividend. BC recouped its original investment plus a 30% return.
The business was attractive enough to whet Dixons’ appetite then. Barely more than a year later, Phones 4u has collapsed into administration.
The rapid demise shocked the retail world last weekend and left 5,600 staff in limbo as 720 branches were shuttered. The once-mighty middleman of the mobile phone industry turned out to have been undone at lightning speed by Dixons’ merger with Carphone Warehouse and the exit of Vodafone and EE as suppliers.
The recriminations began as the events leading to the disaster were publicly dissected.
Quadrio Curzio accused Vodafone of severing its contract in a way that “appears to have been designed to inflict the maximum damage to their partner of 15 years, giving Phones 4u no time to develop commercial alternatives”.
Vodafone hit back, accusing BC of burdening the company with excessive debt and leaving the management team “little commercial flexibility” to negotiate a new contract.
John Caudwell, Phones 4u’s founder, who netted £1.5bn when he sold out in 2006, had few kind words for either. The 61-year-old said the networks’ behaviour was “collusive and utterly ruthless” and that BC’s dividend had “weakened [Phones 4u’s] balance sheet and loaded it with debt”.
On Friday, Vodafone pounced on 140 stores, saving 900 jobs. As Dixons Carphone and EE continue to circle the company’s carcass with a view to picking off the best stores, those recriminations are likely to turn into legal threats.
Lawyers for BC at Dickson Minto are understood to be exploring whether the mobile networks could be accused of collusion for the way they pulled the rug from under Phones 4u. “It looks as if they are cynically trying to pick up the pieces on the cheap, having pushed it over the edge,” said one person close to the process.
Several bondholders who invested in its debt plan to sue BC and the management team for what they see as unrealistically optimistic statements about its financial health. Blue-chip fund managers including BlackRock, Alliance Bernstein and Fidelity International lent Phones 4u a total of £635m. They are likely to lose most of it.
“This is the most significant event in the history of European high yield,” said one senior bondholder. “There has not been a precipitate loss of value like this since Enron, so it’s extremely, extremely meaningful . . . It’s a total assassination by the networks but we also expect everyone to fulfil their obligations and there’s very strong evidence that BC and management did not fulfil their duties of care.”
BC BOUGHT Phones 4u in 2011 from rival Providence Equity Partners. It was one of the last deals led by Andrew Newington, who oversaw BC’s tangled buyouts of Fitness First and Foxtons before leaving for a break in Australia with his family last year.
The idea was to capitalise on Phones 4u’s popularity with under-25s by opening more stores and offering more tech accessories. The deal was predicated, in private equity parlance, on a “roll-out story”.
The first sign of trouble came last January, when O2 pulled out of Phones 4u. The network said it was a commercial decision based on the fact that Phones 4u accounted for only 8% of its contract sales.
A month later news leaked that Carphone Warehouse and Dixons were planning to merge. About the same time, BC wrote down the enterprise value of Phones 4u by 6%. The level of debt the company was carrying magnified the impact on BC’s equity stake, which shrank from £40m to £8m.
Insiders said the revaluation was a standard quarterly exercise based on the performance of listed rivals and the direction of underlying earnings. Still, observers rightly pointed out the Dixons Carphone combination would no longer need Phones 4u’s 160 concessions.
Against this backdrop the retailer’s management, led by David Kassler and Tim Whiting, started negotiating a renewal of Vodafone’s supply contract. According to people close to the talks, executives at the network “went out of their way” to reassure Phones 4u it was still their preferred retailer.
On June 10, a senior Vodafone executive, Cindy Rose, emailed Kassler to say she was confident of getting a deal signed off by Vittorio Colao, Vodafone’s chief executive, and Philipp Humm, its regional boss. On July 8, Vodafone’s British arm sent a presentation to its American headquarters describing Phones 4u as its “partner of choice”.
At the same time an investment banker friendly to BC was trying to persuade Colao he should buy Phones 4u outright. In June, Colao bumped into EE’s boss, Olaf Swantee, at a Founders Forum event at the five-star Grove hotel near Watford. They discussed taking over the company together.
Vodafone and EE took a cursory look at Phones 4u but the idea faded. Then, in mid- August, Rose delivered the knockout: as part of Project Spring (a plan to reduce the range of shops through which it sells contracts) Vodafone had decided to pull out of Phones 4u. She sent the message while on holiday at Disneyland in Florida. The email sparked panic. Kassler begged Rose for more time to put together a counter-proposal.
The two sides met on August 27. Rose told Kassler the commercial details of the contract were no longer relevant: Project Spring was about streamlining distribution, not improving margins. Kassler pleaded for another 48 hours.
Two days later he made her a remarkable offer: Phones 4u would let Vodafone dictate whatever terms it liked — and take control of the company’s most profitable stores. It was a desperate ploy.
Vodafone still said no. Sources close to the network said BC had hobbled Phones 4u by “stripping it bare” and piling it with debt, leaving Kassler and Whiting no room to manoeuvre until it was too late.
On September 1, Kassler and his senior team explained the news on a conference call with distraught bondholders. One accused the board of having been blindsided by Vodafone; another said BC had turned itself into a “sitting duck” owner by taking its money out.
Kassler insisted customers “are almost never coming in looking for a particular network” but admitted that if they sensed “we were unable to provide choice of any description, and all you are doing is putting it all on the same network, clearly that’s less attractive than someone who can provide a wide degree of choice”.
AT THE time, Phones 4u was in the process of trying to extend its supply contract with EE, parent of the Orange and T-Mobile brands and its last remaining big network.
At first EE was supportive about Vodafone’s exit, according to people close to the talks. Then it went silent.
On September 10, EE sent an aggressively worded legal letter to Phones 4u alleging contract breaches. Two days later, at the close of business on Friday, EE told Phones 4u it planned to walk away after its contract expired next Septem–ber. The game was up. Lawyers insisted its directors put the company into administration.
Founder: John Caudwell, with partner Claire, sold the firm for £1.5bn (Rex Features) One onlooker speculated the networks’ timing was influenced by the imminent launch of the iPhone 6 — they wanted to capture the appealing profit margins themselves rather than hand some to Phones 4u.
Caudwell warned that Dixons Carphone, the last middleman of any scale, should now be looking over its shoulder. “Unless they do something to insulate themselves from these networks, the writing’s on the wall,” he said.
Sources close to Dixons Carphone insisted it was too important a channel for the networks to neglect.
Phosphorus Jersey, the offshore company through which BC owned Phones 4u, issued a statement saying it was “devastated” by the collapse. It urged bondholders to form a committee and get in touch.
Some were unconvinced of the private equity firm’s sincerity. Having tried and failed to keep Phones 4u alive with a debt-for-equity swap mooted by the law firm Brown Rudnick, they feel bruised.
“That money they took out [through the dividend] belongs to creditors,” one said. “I don’t care what disclosures they made when they took out that Pik note; there’s no question they have behaved in a highly conflicted way.
“It just seems outrageous that a high street retailer with £1bn of revenues and £100m of profits would go into administration in two weeks with no warning.”
Comment (3)
Interesting article in the telegraph this morning and not too far off the mark - http://www.telegraph.co.uk/men/thinking-man/111098...
jogon said:
Interesting article in the telegraph this morning and not too far off the mark - http://www.telegraph.co.uk/men/thinking-man/111098...
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