First retail ‘name’ to pop off 2018
Discussion
Alpinestars said:
loafer123 said:
The landlords votes are worth a lot less than the other secured creditors.
In what way?The value of the landlord's exposure is calculated and then they only get 25% of the votes against that value than other creditors do.
See http://news.costar.co.uk/en/assets/news/2018/July/... for example.
loafer123 said:
Alpinestars said:
loafer123 said:
The landlords votes are worth a lot less than the other secured creditors.
In what way?The value of the landlord's exposure is calculated and then they only get 25% of the votes against that value than other creditors do.
See http://news.costar.co.uk/en/assets/news/2018/July/... for example.
loafer123 said:
Alpinestars said:
loafer123 said:
The landlords votes are worth a lot less than the other secured creditors.
In what way?The value of the landlord's exposure is calculated and then they only get 25% of the votes against that value than other creditors do.
See http://news.costar.co.uk/en/assets/news/2018/July/... for example.
Alpinestars said:
loafer123 said:
Alpinestars said:
loafer123 said:
The landlords votes are worth a lot less than the other secured creditors.
In what way?The value of the landlord's exposure is calculated and then they only get 25% of the votes against that value than other creditors do.
See http://news.costar.co.uk/en/assets/news/2018/July/... for example.
If I have a secured debt of £100k, I get 100,000 votes.
If I have a lease to the same person of £50,000 for 10 years, the gross exposure is £500,000, and then the calculation takes into account the fact I can mitigate my risk by reletting (fair enough) and so the amount owed might be deemed to be £100,000.
Then, because I am a landlord, that £100,000 is discounted by 75% in terms of votes, so I only get 25,000 votes.
Not all creditors are equal.
muffinmenace said:
So will the CVA be re-started with a new financer?
It could in theory but that assumes any new financier thinks the overall restructuring plan as proposed by HOF management to support the CVA is the best route forward.I would suggest that it isn’t and most definitely not for the two most obvious parties.
loafer123 said:
No, they don’t get an equal vote.
If I have a secured debt of £100k, I get 100,000 votes.
If I have a lease to the same person of £50,000 for 10 years, the gross exposure is £500,000, and then the calculation takes into account the fact I can mitigate my risk by reletting (fair enough) and so the amount owed might be deemed to be £100,000.
Then, because I am a landlord, that £100,000 is discounted by 75% in terms of votes, so I only get 25,000 votes.
Not all creditors are equal.
Sorry, I don’t really understand that. If I have a secured debt of £100k, I get 100,000 votes.
If I have a lease to the same person of £50,000 for 10 years, the gross exposure is £500,000, and then the calculation takes into account the fact I can mitigate my risk by reletting (fair enough) and so the amount owed might be deemed to be £100,000.
Then, because I am a landlord, that £100,000 is discounted by 75% in terms of votes, so I only get 25,000 votes.
Not all creditors are equal.
Secured creditors rarely vote in a CVA - technicaly they can vote their shortfall, but generally they don’t as it can impact their security. Do you mean other unsecured creditors outside of landlords?
My understanding of HOF’s case is that landlords’ liabilities were valued and discounted by 75% which I think represented their post CVA outcome. I’m not sure how many other CVAs have used this approach, and I can understand the inequality of using the approach, and hence the potential legal challenge.
My understanding is that landlord claims are normally valued on an NPV basis.
Alpinestars said:
Sorry, I don’t really understand that.
Secured creditors rarely vote in a CVA - technicaly they can vote their shortfall, but generally they don’t as it can impact their security. Do you mean other unsecured creditors outside of landlords?
My understanding of HOF’s case is that landlords’ liabilities were valued and discounted by 75% which I think represented their post CVA outcome. I’m not sure how many other CVAs have used this approach, and I can understand the inequality of using the approach, and hence the potential legal challenge.
My understanding is that landlord claims are normally valued on an NPV basis.
Sorry - I meant unsecured, not secured.Secured creditors rarely vote in a CVA - technicaly they can vote their shortfall, but generally they don’t as it can impact their security. Do you mean other unsecured creditors outside of landlords?
My understanding of HOF’s case is that landlords’ liabilities were valued and discounted by 75% which I think represented their post CVA outcome. I’m not sure how many other CVAs have used this approach, and I can understand the inequality of using the approach, and hence the potential legal challenge.
My understanding is that landlord claims are normally valued on an NPV basis.
Your understanding is correct, which is that landlords claims are calculated on an NPV basis, but then, unlike other creditors, they only receive 25% of the votes that NPV would imply.
It is inequitable. In my view the 75% rule was used when it was done on a gross liability basis, to account for the ability of landlords to recover the majority of their gross loss by reletting, but that it is still applied despite the NPV method taking account of that already.
loafer123 said:
Alpinestars said:
Sorry, I don’t really understand that.
Secured creditors rarely vote in a CVA - technicaly they can vote their shortfall, but generally they don’t as it can impact their security. Do you mean other unsecured creditors outside of landlords?
My understanding of HOF’s case is that landlords’ liabilities were valued and discounted by 75% which I think represented their post CVA outcome. I’m not sure how many other CVAs have used this approach, and I can understand the inequality of using the approach, and hence the potential legal challenge.
My understanding is that landlord claims are normally valued on an NPV basis.
Sorry - I meant unsecured, not secured.Secured creditors rarely vote in a CVA - technicaly they can vote their shortfall, but generally they don’t as it can impact their security. Do you mean other unsecured creditors outside of landlords?
My understanding of HOF’s case is that landlords’ liabilities were valued and discounted by 75% which I think represented their post CVA outcome. I’m not sure how many other CVAs have used this approach, and I can understand the inequality of using the approach, and hence the potential legal challenge.
My understanding is that landlord claims are normally valued on an NPV basis.
Your understanding is correct, which is that landlords claims are calculated on an NPV basis, but then, unlike other creditors, they only receive 25% of the votes that NPV would imply.
It is inequitable. In my view the 75% rule was used when it was done on a gross liability basis, to account for the ability of landlords to recover the majority of their gross loss by reletting, but that it is still applied despite the NPV method taking account of that already.
Equity or not, there is a real problem with fixed costs of doing business for retailers. Rents and rates included. Something has to give.
Alpinestars said:
I don’t disagree with that. I do however understand the equity of using a proper NPV calculation, and 75% does not appear to be equitable.
Equity or not, there is a real problem with fixed costs of doing business for retailers. Rents and rates included. Something has to give.
In which case, we are in complete agreement.Equity or not, there is a real problem with fixed costs of doing business for retailers. Rents and rates included. Something has to give.
Retail is in real trouble and rents (and eventually rates) will have to fall a long way.
loafer123 said:
Alpinestars said:
I don’t disagree with that. I do however understand the equity of using a proper NPV calculation, and 75% does not appear to be equitable.
Equity or not, there is a real problem with fixed costs of doing business for retailers. Rents and rates included. Something has to give.
In which case, we are in complete agreement.Equity or not, there is a real problem with fixed costs of doing business for retailers. Rents and rates included. Something has to give.
Retail is in real trouble and rents (and eventually rates) will have to fall a long way.
anonymous said:
[redacted]
Huge losses amongst shopping centre owners.High streets contracting and conversion of tertiary pitches to resi & offices.
Reducing rents will then draw businesses back into town centres.
You can see now that low rent good market towns are doing OK, whilst high rent, high service charge shopping centres are imploding.
anonymous said:
[redacted]
Supply and demand I guess. If there are no other uses for retail sites, landlords in the long run will need to reduce rents. There may be pressure from the public on councils to reduce rates - especially if closure of high streets en masse destroys community spirit. If there are alternative uses for the real estate, I guess landlords will cash in.
In the meantime, the appetite for investors to buy up UK real estate is taking a hit.
talksthetorque said:
25% Vat on mail order goods with the extra 5% ploughed back in to reducing business rents on high streets?
That might keep some high street shops in business, but would it solve their issues with limited stock, travel time from my house, and sales staff that invariably know less than I could glean from a few minutes web search before I left said house?I've tried to give high street shops a chance recently and they've mostly failed, Currys, Argos, local bike shop and local whisky shop being the only real exceptions. Mostly I buy from shops when it's a present and I know I absolutely need it today or tomorrow, anything else is online and I can generally avoid Amazon and still get stuff for the same price. Amazon's strength is it's omnipresent ubiquity, nothing particular about its range or service, although their delivery flexibility is getting there.
loafer123 said:
Sorry - I meant unsecured, not secured.
Your understanding is correct, which is that landlords claims are calculated on an NPV basis, but then, unlike other creditors, they only receive 25% of the votes that NPV would imply.
It is inequitable. In my view the 75% rule was used when it was done on a gross liability basis, to account for the ability of landlords to recover the majority of their gross loss by reletting, but that it is still applied despite the NPV method taking account of that already.
Landlords can always sell their asset if they have to; in general they will not starve. If a property can’t be re-let to another tenant relatively quickly then it was fundamentally over-priced to begin with. No other suppliers get to lock in customers upward-only price changes for decades Your understanding is correct, which is that landlords claims are calculated on an NPV basis, but then, unlike other creditors, they only receive 25% of the votes that NPV would imply.
It is inequitable. In my view the 75% rule was used when it was done on a gross liability basis, to account for the ability of landlords to recover the majority of their gross loss by reletting, but that it is still applied despite the NPV method taking account of that already.
And yes I let our commercial property but no I dont have a problem with this alleged inequity - other unsecured creditors will do much worse, and most wont have the effective margins of landlords.
I have been a retailer all my life, in the fashion clothing industry and in outdoor clothing, and equipment, camping and travel.
I have seen ups and downs several times before, but this is different.
1) Internet has been very disruptive to High Street retailers.
Those most affected have been retailers selling Branded products.
These Branded products are easily identifiable by the consumer so when they go onto the Internet in most cases it's been a race to the bottom on price.
The platforms EBay and more recently Amazon make price comparisons very simple.
When you search for a product it is the Amazon or EBay platforms that appear first and second and that often sets the headline price.
Retailers therefore go through these platforms but the costs to their bottom line can be very high, say 20% of the sale price.
When you factor in other costs your margins are wafer thin.
If you do find say a product from China that's a good seller you've only usually got a couple of months before everybody else jumps in and the selling price plummets.
Amazon also notice good sellers and they become your competitors.
It's dog eat dog.
Be aware though that the headline price is rarely the price you end up paying, you have ouften to factor in postage (sometimes,but not always,foc.)
There is also dubious practices where you click on the headline price on Amazon and find, for instance. that the price is for say a 35 litre rucksack and not the 65 litre rucksack that you searched for.
2) Larger retailers that only sell their own Brand eg. Next , Zara have an inbuilt advantage over other general retailers as price comparison is not such a problem, because if you like a pair of Zara trousers you can only get them from Zara.
Their costs of purchase are much lower as they are buying direct with no middle man and therefore the mark up is say, x 5 of costs ,whilst smaller retailers working through wholesalers might only be able to mark up x 2.
3) Generally the days of the High street store like Debenhams are numbered as they cannot compete on price and are very expensive to run.
The fixed costs....rents, business rates etc are very high so that staffing is the only area they can make savings.
So they pay peanuts and oftenget monkeys, no disrespect.
That or there are very few staff on the shop floor and the tills and that's frustrating for the customer, so it becomes a vicious down hill spiral.
Anyway that's enough for now.
I have seen ups and downs several times before, but this is different.
1) Internet has been very disruptive to High Street retailers.
Those most affected have been retailers selling Branded products.
These Branded products are easily identifiable by the consumer so when they go onto the Internet in most cases it's been a race to the bottom on price.
The platforms EBay and more recently Amazon make price comparisons very simple.
When you search for a product it is the Amazon or EBay platforms that appear first and second and that often sets the headline price.
Retailers therefore go through these platforms but the costs to their bottom line can be very high, say 20% of the sale price.
When you factor in other costs your margins are wafer thin.
If you do find say a product from China that's a good seller you've only usually got a couple of months before everybody else jumps in and the selling price plummets.
Amazon also notice good sellers and they become your competitors.
It's dog eat dog.
Be aware though that the headline price is rarely the price you end up paying, you have ouften to factor in postage (sometimes,but not always,foc.)
There is also dubious practices where you click on the headline price on Amazon and find, for instance. that the price is for say a 35 litre rucksack and not the 65 litre rucksack that you searched for.
2) Larger retailers that only sell their own Brand eg. Next , Zara have an inbuilt advantage over other general retailers as price comparison is not such a problem, because if you like a pair of Zara trousers you can only get them from Zara.
Their costs of purchase are much lower as they are buying direct with no middle man and therefore the mark up is say, x 5 of costs ,whilst smaller retailers working through wholesalers might only be able to mark up x 2.
3) Generally the days of the High street store like Debenhams are numbered as they cannot compete on price and are very expensive to run.
The fixed costs....rents, business rates etc are very high so that staffing is the only area they can make savings.
So they pay peanuts and oftenget monkeys, no disrespect.
That or there are very few staff on the shop floor and the tills and that's frustrating for the customer, so it becomes a vicious down hill spiral.
Anyway that's enough for now.
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