Oddbins: administration pay out estimate drops from 13.6p to 7.5p

See report in The Drinks Business:

'Oddbins lowers administration payout forecast

Oddbins creditors face receiving just 7.5 pence in the pound should the Company Voluntary Arrangement not be accepted at tomorrow’s creditors meeting in London, after forecasts for payouts should the retailer enter administration were downgraded.'

Does this mean that Oddbins is in an even worst state than was initially thought? Furthermore if this is the case shouldn't the estimated pay out through the CVA also be cut by a similar amount?

Comment from a spokesperson:
'The amount payable under Administration is only ever a forecast. Threshers payout is now down to 2 pence but the creditors haven't actually received anything yet.

The amount payable under the CVA remains at 21 pence, plus 50% of any outcome from the court case. A payment schedule appears within the CVA documentation (www.deloitte.com/oddbins).

Although Simon Baile continues to have discussions with investors it is still too early for anything to be announced. The reduction is a reflection of the fact that no purchasers have come forward.'

Comments from Westbury Communications who handle PR for Oddbins

Following my post (http://jimsloire.blogspot.com/2011/03/oddbinsdulwich-villages-emptying.html) I received the following comments from Westbury:

The stock in Oddbins is severely depleted as they have not been able to buy any new stock since January. If the CVA is approved then this will change.

Deloittes has ratified the CVA proposal on the basis that the core business left after the restructure has a solid footing. The 89 shops remaining were all significantly profitable up until stock became tight – shops that have been closed may just have been in the wrong area or also suffer from high rates. The CVA, if approved, also allows Simon to deal with some of the issues which form the basis of the high court claim Oddbins has against Nicolas. It also seems that Oddbins has met every payment due for the deferred consideration but Nicolas owes Oddbins £1.4m pounds under the indemnities.

If the CVA goes through, the business should be able to gradually re-attain the footing it had in the summer of 2010 whereby the footfall had increased and the average transaction price had gone up 4.4% over previous year. The main suppliers are supporting the cva. Several analysts (not Oddbins) have said that, although we cannot second guess them, the HMRC, who are owed 8.4m, are likely to ratify the cva rather than see all Oddbins employees without work, and the landlords are facing a grim prospect as the retail high street is not currently buoyant.

I hope that gives you a bit of a snapshot. I apologise that we have not spoken in detail to wine writers – it was always our intention to do so. However, a leak three weeks ago has meant that we have been dealing on a daily basis with huge media interest from tv and radio as well as all the nationals and major regionals. This was during the time the strategic review was going on and the CVA had yet to be announced so it has been a huge balancing act of responding fairly to media enquiries without jeopardising staff and supplier relationships.

In response I asked Westbury: ‘A crucial question is on what terms will suppliers continue to sell wine to Oddbins following agreement on the CVA? Will small to medium sized producers want cash up front to avoid racking up further potential losses?’

Westbury's response

It will be cash on delivery.*

The stores that remain are ‘significantly profitable’ and Oddbins was trading successfully in these stores until late last year – the figures for the first half of last year show increased footfall and an increased average price per transactions. The company has 3.5 million customers. The strategic review has involved considerable external expertise and the future of the business, on the basis that a significant amount of base cost has been shaved off, is considered to be on a solid footing.

An extra point that has been missed in a lot of the reporting is that creditors will receive 21p in the pound, plus 50% of any potential outcome of the court case with Nicolas. The claim is in the High Court (Queen’s Bench) and has been brought by Oddbins against Nicolas – it is pretty extensive and covers many areas, most of which have affected Oddbins' ability to restructure the business and trade successfully. Simon is bound by confidentiality so is unable to talk in any detail.

See post on Oddbins in administration.

* As suppliers will be wanting cash on delivery, will HMRC (UK tax authorities) who are owed £8.6 million also want duty and tax paid on the nail?

Oddbins@Dulwich Village – emptying shelves

A sign of the times – but for how long?

Shadows gather over Oddbins

I took a walk down to the Oddbins branch in Dulwich Village yesterday. In Oddbins' glory days the shop was busy and full of interesting wines. Yesterday was a sad contrast with just one person in a shop with little stock. What little stock there was had been creatively stretched to make it look as if most of the shelves had bottles on them with some wooden cases – empty? – used to cover up the remaining shelves. Walking around it was strangely echoey – reflecting its essential near emptiness. To be fair this shop was not as empty as the Unwins stores were just before the closure but Oddbins seems to be clearly heading that way.

From a recent report on decanter.com it seems that the CVA will be approved on 31st March but I fear that this is just going to stave off briefly the inevitable administration. Gone within six months perhaps?

Oddbins@Dulwich Village

Loire Chenin Blanc from Bougrier who are owed £27,439

See here and here for earlier posts on Oddbins plight.

See also Leon Stolarski: http://leonstolarski.blogspot.com/2011/03/oddbins-is-this-end-for-once-proud-wine.html

Oddbins in dire straits?

Oddbins seeks a CVA (creditors voluntary arrangement) to escape administration 
Stricken multi-drinks retailer Oddbins appears to be facing a bleak future and may go the way of other failed high street drinks retailers like Unwins and Threshers (First Quench).
 
 Oddbins’ management is seeking agreement on a CVA (creditors voluntary arrangement) that will pay creditors 21p in the £. Oddbins is known to owe HMRC (HM Revenue & Customs) £8.6 million and it is reported that there are nine companies owed over £100,000 each. These include importers Hatch Mansfield (£310,000), Concha y Toro (£242,000), Halfords (£173,500) and De Bortoli Wines (£107,000). Other notable creditors include Diageo GB (£84,000) and electricity supplier EDF (£51,000). The total figure is not yet known but some estimate that the total is over £20 million.
 

The proposed CVA will be voted upon at a meeting of creditors on 31^st March. For the proposals to be accepted they must attract 75% of the vote by value. If the deal is accepted creditors will be due to be paid 21p for every pound owed spread over 46 months. If the CVA is not approved and Oddbins goes into administration then it is estimated that the payout would be down to 13.6p in the pound.  However, companies would be more likely to get their money sooner and for some this may be the more attractive option.  

 

Oddbins are closing 39 stores and laying off 120 staff. 

Assuming that Oddbins do get approval for their CVA proposals on 31st March, they will still face a very tough challenge making the 'core' that remains profitable. Suppliers are likely to want payment upfront when selling goods making it very hard to be competitive on price. Furthermore since the business was founded in 1971 it has a long history of unprofitability under its various owners, who have included Seagram, Vivendi and Castel. 

My guess is that Oddbins will go the way of Threshers (First Quench) and Unwins – No-bins beckons? 


See also here (Victoria Moore plus comments), here (harpers wine & spirit)  and here (drinks business).