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.
17 comments:
How about asking Simon how he would define wrongful trading?
Unfortunately Anon it now looks likely that none of my questions will be answered until after the meeting.
I assume the question is has Oddbins traded while insolvent? Certainly a question worth asking given the level of debt.
Please remember that articles like this are inevitably going to be read by Oddbins employees like myself as we frantically Google around for any new developments. I don't see how asserting 'Reject the CVA!' in red type really helps anyone, particularly those shop workers who have done nothing wrong and risk losing their jobs tomorrow.
Deloitte have now given a 7p-in-the-pound figure should Oddbins go into administration. No matter what people think of the company, it's in everyone's interests that the CVA is accepted.
"Better to vote against and go into administration while there are still some assets left?"
No - the Inland Revenue will take almost all of that 7%, leaving the other creditors with literally nothing.
Unattractive though it might be, 21% is the best offer on the table.
Anon. I have never suggested that the Oddbins employees are at fault. I realise that you are in a very difficult position. Instead you might wonder why no new investment appears to have been put into Oddbins since it was acquired in 2008.
Anon. I would suggest that neither of the offers are attractive.
It seems to be a choice between 'Very little, which possibly might amount to nothing' (the 21% offer) or 'Definitely nothing' (the 7% one). What motivation do they have for taking the latter? The satisfaction of seeing Baile and Young fall?
"Instead you might wonder why no new investment appears to have been put into Oddbins since it was acquired in 2008."
I do wonder that. Right now, though, all I really care about is keeping my job.
Anons: Naturally you are concerned to keep your job but the responsibility for your current situation is down to the mistaken strategy by your management, in particular selling single bottles at a high price, and failing to develop on-line sales.
It may be of little consolation but the unpaid tax is due to us – due to our government.
If it's the tax that matters, why not endeavour to keep the 200+ Oddbins employees in work?
If you ask those who work at Oddbins, I think you'll find that the former head buyer was not respected, had overseen a poor buying policy (particularly in France) and so was understandably then let go from his position.
It's a very stressful time for Oddbins employees, all of whom could do without blogs/articles joyously tolling the death knell. None of us are fans of Baile and Young, but all the shit-stirring doesn't really help anyone.
Of course the tax matters and Oddbins wouldn't be in this pickle if it had been paid. Why wasn't £3.5 million of your PAYE paid over to HMRC not to mention £5 million in duty.
'but all the shit-stirring doesn't really help anyone'
I don't know who you are accusing of shit-stirring. I was asked to put some question to your MD Simon Baile, which I did. Admittedly the questions were specific and reasonably detailed but I think they are questions anyone considering how to vote at the CVA would want to ask and certainly any potential investor would pose.
If there is a complaint to be levelled against sections of the press it is that some of us haven't been sufficiently critical and haven't looked in sufficient detail at what has brought the company to its present situation.
You have to ask why is it that companies such as Majestic and Naked Wines are successful while Oddbins isn't.
Hi Jim
I'm also an oddbins employee. I’m not connected in any way to the management of the company
For the past month we've been living in fear of our jobs disappearing without any sort of redundancy package or recompense. Believe me, it's not a pleasant situation to be in.
Yes, this situation is due to the current regime's naivety and lack of business sense.
Yes, many good suppliers are now left in the lurch through no fault of their own. I feel nothing but profound regret that our suppliers find themselves in this situation
However, I have to question what your motive is by plastering statements like "Time surely to put sentiment aside and vote against the CVA. Thus forcing Oddbins into administration. " are.
What is your agenda?
It seems as though you almost have a personal vendetta against Oddbins that goes beyond the normal journalistic conventions.
The liquidation of Oddbins will help no one - not us employees, not the creditors, not the taxpayers whom the "the unpaid tax" is owed to.
You are a respected voice in the world of wine and I would urge you to use that voice responsibly.
Anon. Thanks for your comment. I have no agenda against Oddbins. I have fond memories of Oddbins in its heyday just like many others.
I will be very surprised if the CVA, if approved, will work. Look not only at the suppliers who are creditors but big names who aren't. No sign of Moët-Hennessy, for example. Were they one of the firms who declined to supply Oddbins?
I suspect that passing the CVA will lead to more debt being built up. I accept that administration is likely to pay little out to many creditors. However, it may be under administration that part/parts of the business could be sold as a going concern and some jobs saved.
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