What happens when theses big companies go bust ??
Discussion
I think I know the answer already but what happens when these big companies goes bust like Woolies (380 - million quid) ?.
You hear of these companies that 'all of a sudden' seem to announce big debts and then they fold owing millions. Who pays ? Do the banks just right the debt off ?
Therefore we the customers pay for it ?
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
If I went a couple of grand in debt on my house I'd be fcucked over by somebody.
You hear of these companies that 'all of a sudden' seem to announce big debts and then they fold owing millions. Who pays ? Do the banks just right the debt off ?
Therefore we the customers pay for it ?
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
If I went a couple of grand in debt on my house I'd be fcucked over by somebody.
SimonV8ster said:
I think I know the answer already but what happens when these big companies goes bust like Woolies (380 - million quid) ?.
You hear of these companies that 'all of a sudden' seem to announce big debts and then they fold owing millions. Who pays ? Do the banks just right the debt off ?
Therefore we the customers pay for it ?
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
If I went a couple of grand in debt on my house I'd be fcucked over by somebody.
They have had the debts for ages, it is all there in their publicly available reports.You hear of these companies that 'all of a sudden' seem to announce big debts and then they fold owing millions. Who pays ? Do the banks just right the debt off ?
Therefore we the customers pay for it ?
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
If I went a couple of grand in debt on my house I'd be fcucked over by somebody.
Most large companies have large debts - it allows them to grow and acquire other companies etc...
What typically happens is that the company starts posting losses which eats into their pile of cash (they still have debts too at this point). Eventually the cash starts to run out and if it looks like the business is never going to turn around then the debt holders force it into bankruptcy. At this point the company sells any assets it can (shops, other viable businesses, pic-n-mix inventory etc...) and from the cash they raise selling those assets, they pay off the debts.
If the banks capped the debts at 20-50m for everyone that would severely limit the size any business could achieve.
The analogy with an individual is relevant here.
As your salary increases, the bank is prepared to lend you more, because you have more future earnings to pay off that debt.
Same for companies as they grow.
SimonV8ster said:
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
All down to collateral for the debt - a debt of £1billion is fine if you have collateral to cover it. The receivers will split up the company, sell what they can paying off the debts in a defined order. Anyone left at the end of the debt chain will lose out, so yes in a way we could be paying for it, but the profit the bank has made from multiple companies over time will offset these losses.They charge more if you have a higher chance of defaulting, to offset this risk.
The idea is that the banks believe the companies can service their debt levels - just like you making your mortgage payments to service that debt. When a company borrows more money the lenders should check they agree that the company can still service the debt.
When a company goes bust the Receivers are appointed and will try to raise as much from the assets (remaining stock, existing assets such as machinery or property) as they can, sometimes by selling the company complete, sometimes breaking it up. There's a set order in which the funds raised are distributed to creditors and they don't usually get the full value of what's owed.
When a company goes bust the Receivers are appointed and will try to raise as much from the assets (remaining stock, existing assets such as machinery or property) as they can, sometimes by selling the company complete, sometimes breaking it up. There's a set order in which the funds raised are distributed to creditors and they don't usually get the full value of what's owed.
SimonV8ster said:
I think I know the answer already but what happens when these big companies goes bust like Woolies (380 - million quid) ?.
You hear of these companies that 'all of a sudden' seem to announce big debts and then they fold owing millions. Who pays ? Do the banks just right the debt off ?
Therefore we the customers pay for it ?
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
If I went a couple of grand in debt on my house I'd be fcucked over by somebody.
You would have paid for it if you had shares in them... assuming the capitalised value of the company (hence share price) refelected the huge debt the banks deemed appropriate to allow.You hear of these companies that 'all of a sudden' seem to announce big debts and then they fold owing millions. Who pays ? Do the banks just right the debt off ?
Therefore we the customers pay for it ?
Why can't the banks cap the debts at say 20M or 50M rather than letting it get to hundreds of millions ?
If I went a couple of grand in debt on my house I'd be fcucked over by somebody.
What really happens when something like 'Wollies' goes under?
30,000 immidieatly out of work, most of them hard working women that really needed the money for their families to enjoy a 'proper' christmas.
Creditors form an ordely queue as the recievers. Recivers flogs off everything, creditors get maybe 25p in the pound owed (if their very lucky - more like 10p in real terms).
Anyone who had shares in the company now has some paper to light a fire with. No money back no guarantee.
Rich or poor, black or white. All lose.
30,000 immidieatly out of work, most of them hard working women that really needed the money for their families to enjoy a 'proper' christmas.
Creditors form an ordely queue as the recievers. Recivers flogs off everything, creditors get maybe 25p in the pound owed (if their very lucky - more like 10p in real terms).
Anyone who had shares in the company now has some paper to light a fire with. No money back no guarantee.
Rich or poor, black or white. All lose.
Edited by Tony*T3 on Tuesday 9th December 14:05
Tony*T3 said:
What really happens when something like 'Wollies' goes under?
30,000 immidieatly out of work, most of them hard working women that really needed the money for their families to enjoy a 'proper' christmas.
Creditors form an ordely queue as the recievers. Recivers flogs off everything, creditors get maybe 25p in the pound owed (if their very lucky - more like 10p in real terms).
Anyone who had shares in the company now has some paper to light a fire with. No money back no guarantee.
Rich or poor, black or white. All lose.
Well not all, the recivers do quite well out of it.30,000 immidieatly out of work, most of them hard working women that really needed the money for their families to enjoy a 'proper' christmas.
Creditors form an ordely queue as the recievers. Recivers flogs off everything, creditors get maybe 25p in the pound owed (if their very lucky - more like 10p in real terms).
Anyone who had shares in the company now has some paper to light a fire with. No money back no guarantee.
Rich or poor, black or white. All lose.
Edited by Tony*T3 on Tuesday 9th December 14:05
ked.... BUT if you owe the bank 20million... they are fGassing Station | The Pie & Piston Archive | Top of Page | What's New | My Stuff