SQ is not a stand-alone decision-making robot, it has owners. The owners own a going-concern grocery business and they have also invested poorly in property. The owners owe the money and the owners own the business (I'm sure there are multiple companies within the SQ private company which enables this separation to take place).If Superquinn owes 400m then that 400m debt should be sold with the company... allowing the company to seperate its debts from its assets is the problem. (In the house example, the owner owes the money, not the house, that's the distinction)
Not trying to be pedantic, but I didn't say the sale by Fergal Quinn was immoral, and I didn't raise a concern about the high price. I sait it was disappointing, and I raised a concern about selling it in a leveraged buyout.1) it was immoral for Fergal Quinn to sell the business for a high price 5 years ago. I think few would agree with you, but you are entitled to your own sense of morality I suppose.
2) It was immoral for Fergal Quinn to sell it to a company which had to borrow. Again, I would not agree with that either.
Agreed.3) It was stupid of the banks to lend the money to the buyers. No more nor no less stupid than any of the other property based deals.
Again, that's not what I said. I didn't criticise Musgraves, who are presumably just out get the best deal they can. It is immoral for the State through the banks to be left to pick up the tab for property speculation, when there is a viable long-term business here that will be well capable of paying these debts in the long term, albeit longer than they had planned under their current banking arrangements.4) It was immoral for Musgraves to buy the business from the receiver without agreeing to pay the debts as well. I and others have explained this, numerous times.
How can you be sure that the rushed sale to Musgrave's minimises the loss to the bank? How can you be sure that a higher price could not have been achieved from an international seller, if the sale had been given more time?Any losses borne by the state were incurred when the loan was given and when the banks were nationalised. The sale of the business to Musgraves minimises the loss to the banks and to the state. We should be rejoicing at Musgrave's decision to buy it.
Examinership doesn't seem to have done too much damage to Quinn Life. Musgraves might indeed have pulled out, but others (particularly international buyers) might have been pulled in.Appointing an examiner is an interesting issue. It is very expensive and very disruptive. Musgraves may well have pulled out by the time the examinership was completed.
It is particularly disappointing that the Quinn family choose to sell to the highly leveraged buyer, given the risk involved to the business and the State.
It is immoral for the State through the banks to be left to pick up the tab for property speculation,
...It is immoral for the State through the banks to be left to pick up the tab for property speculation, when there is a viable long-term business here that will be well capable of paying these debts in the long term, albeit longer than they had planned under their current banking arrangements.
How can you be sure that the rushed sale to Musgrave's minimises the loss to the bank? How can you be sure that a higher price could not have been achieved from an international seller, if the sale had been given more time?
when there is a viable long-term business here that will be well capable of paying these debts in the long term, albeit longer than they had planned under their current banking arrangements.
How can anyone stand up and say 'the price from Musgraves was the best value for money available' given that the deal was done in 8 hours.
How can you be sure that the rushed sale to Musgrave's minimises the loss to the bank? How can you be sure that a higher price could not have been achieved from an international seller, if the sale had been given more time?
There's no way SQ was sold in 8 hours or to the only bidder to consider it. Musgraves wouldn't have had time to do their buyers due diligence, never mind the sellers assuring themselves they were getting the best deal (which may have been the only deal if no-one else wanted to bid). According to today's Irish Times:So the bank should be able to demonstrate that no better deal was possible... and I can't see how they were assured, if they did actually agree to sell to what must have been the first bidder.
Maybe the property loans will go into NAMA, which is going to make a profit in 10 years anyway so what's to worry about..............
The immorality lies with the banks (aka the State) allowing a prepack recievership to go through. They allowed Superquinn/Select to negotiate a deal with Musgraves, and rushed it through without taking the time necessary to ensure they got best value for the tax payer.I am genuinely trying to identify the evil, immoral person you are speakin about. I broke down the various actions in the earlier post and I don't think anyone did anything immoral. Stupid, yes. Immoral, no.
Other retailers have gone through examinerships - Chartbusters, Hughes & Hughes, Bestseller (Vero Moda, Jack Jones) - and come out the other side. I appreciate the SQ is a very large business, but other large businesses have gone through examinership as well.Given the nature of the business, had a buyer not being found, then there would be a lot of empty shelves in a small period of time. There would have been large scale redundancies and given the extremely low profit margins, the company would have experienced losses immediatly resulting in closure. All that would remain would be a few staff and some empty supermarkets....not sure if this would have attracted a higher price.
Since when did a €200m loss for the State become a good deal. And as for the risk, sure if Musgraves borrow the money, no doubt the taxpayer will kindly cover any losses in the future too.I'm not saying the deal is 100% good and I'm sure the devil is in the detail, but most of the parties seem to have done OK out of it. The State is getting something (which is more than it's getting for the other NAMA pproperties), workers keep their jobs and yes Musgraves are getting what could be the deal of the decade for them....but then again who knows....it may be a terrible move, but they are taking the risk I guess.
So do you reckon that Musgraves are going to wait 23 years to get a return on their investment?I think the assumption here is flawed (and will now go on and make some assumptions of my own that are probably also flawed).
As Superquinn is private, details on profitability are not available, but Musgraves in 2010 generated a profit before interest and tax of EUR74.9m on sales of EUR4.4bn. Superquinn is a smaller company, the Irish Times quoted a revenue figure of approximately EUR500m.
If you make the (questionable) assumption that Superquinn generates a similar margin to Musgraves, that would give a profit before interest and tax of EUR8.5m.
The interest bill on EUR400m debt at an interest rate of 4% would be EUR16m p.a.
Fully agree, Orka. I can't understand how the banks clearly let Superquinn/Select negotiate a deal with Musgraves, when in fact, the banks are the owners (in a recievership). It should have been the banks doing the negotiating and ensuring that they got best value for money. Surely there was conflict of interest here?There's no way SQ was sold in 8 hours or to the only bidder to consider it. Musgraves wouldn't have had time to do their buyers due diligence, never mind the sellers assuring themselves they were getting the best deal (which may have been the only deal if no-one else wanted to bid). According to today's Irish Times:
"TALKS ON the deal that yesterday led to Musgrave agreeing to take over troubled grocery chain Superquinn began in earnest last week, but the negotiations were really the latest staging post in a process that got under way earlier this year"
"In December, it appointed a new chief executive, Andrew Street. At the start of this year, he began implementing changes designed to generate more cash from the chain.
In tandem with this, the company began a formal process designed to find either a new investor or a buyer that could inject new cash into the business.
Musgrave’s, a wholesaler that owns a series of supermarket and convenience store franchises, was, along with British and international companies, one of a number of candidates which ran the rule over Superquinn at that stage.
However, its liabilities made the business so unattractive that nobody was prepared to do a deal, or at least not while it was carrying the burden of big property debts.
That meant the company was running out of options. In the end, its banks decided a receivership offered them the best way of separating the trading business from the property loans, and selling it with the aim of recovering some of their debt."
Since when did a €200m loss for the State become a good deal. And as for the risk, sure if Musgraves borrow the money, no doubt the taxpayer will kindly cover any losses in the future too.
.
Other retailers have gone through examinerships - Chartbusters, Hughes & Hughes, Bestseller (Vero Moda, Jack Jones) - and come out the other side. I appreciate the SQ is a very large business, but other large businesses have gone through examinership as well.
Since when did a €200m loss for the State become a good deal.
And as for the risk, sure if Musgraves borrow the money, no doubt the taxpayer will kindly cover any losses in the future too.
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