Changes on the High Street

[1andrew1]

Originally Posted by Chris

And they can’t blame Covid, they plunged to that figure by December 2018. That’s absolutely shocking.

Just a leveraged buy-out whereby the purchaser puts up 10% of the cost of buying the existing shareholders out and the banks 90%. The cost of the debt ensures no corporation tax is due as the business is loss-making on paper.

Originally Posted by 1andrew1

Just a leveraged buy-out whereby the purchaser puts up 10% of the cost of buying the existing shareholders out and the banks 90%. The cost of the debt ensures no corporation tax is due as the business is loss-making on paper.

Yup ... so the ‘owner’ of the business has become the owner almost entirely with someone else’s money, which sounds fine on paper because that’s what a mortgage is, however the level of debt racked up there was clearly unsustainable. A leveraged buyout is still supposed to leave a business able to trade, unless there’s a deliberate underhand plan in play for the directors to milk it dry and then collapse it. Not saying that happened here but it has been known to occur in similar scenarios.

And not forgetting, if it's a US company doing the LBO (even of a UK company), there's a huge tax benefit.

Leveraged Buyout Tax Benefit

Leveraged buyouts create tax shields that, under the United States tax code, allow companies to deduct interest paid on debt as an expense, unlike dividends paid to equity shareholders, which cannot be expensed. For instance, a company that faces a large tax burden can benefit from increased debt financing because the interest is accounted for as an expense, which is tax deductible. Therefore, increasing interest expense results in a significantly lower tax obligation owed to the IRS.

[Carth]

Looks to me like the ones who can't see a scam are the banks . . . again

[denphone]

Originally Posted by Carth

Looks to me like the ones who can't see a scam are the banks . . . again

The question is how much have the banks learnt from the 2008 financial crisis? as l am not qualified to answer that question personally but l am sure someone more qualified will.

[jfman]

They don’t need to learn. Learning from mistakes is on the basis that there’s negative consequences. For many they get to extract money in the good times and leave the Government carrying the can in the bad.

[1andrew1]

Originally Posted by Chris

Yup ... so the ‘owner’ of the business has become the owner almost entirely with someone else’s money, which sounds fine on paper because that’s what a mortgage is, however the level of debt racked up there was clearly unsustainable. A leveraged buyout is still supposed to leave a business able to trade, unless there’s a deliberate underhand plan in play for the directors to milk it dry and then collapse it. Not saying that happened here but it has been known to occur in similar scenarios.

That level of debt is not necessarily unsustainable in normal trading conditions. However, when you've got monthly interest payments to make but no income to make them with then you're stuffed.

[papa smurf]

Originally Posted by denphone

The question is how much have the banks learnt from the 2008 financial crisis? as l am not qualified to answer that question personally but l am sure someone more qualified will.

I would imagine they still have the same idiots making the decisions

[heero_yuy]

Quote from Sky News:

Marks & Spencer (M&S) will serve notice this week of imminent plans for hundreds of job cuts as it becomes the latest prominent retailer to restructure its workforce in the wake of the coronavirus pandemic.

Sky News has learnt that M&S will begin announcing redundancy plans within days, joining the likes of the John Lewis Partnership, Boots, and Debenhams in what has rapidly become a bloodbath on Britain's high streets.

Sources said that several thousand jobs were expected to be lost as chief executive Steve Rowe accelerates an ongoing restructuring of the business during the coming months.

This is despite having taken government (our) money to bolster up jobs.

[nomadking]

Originally Posted by heero_yuy

This is despite having taken government (our) money to bolster up jobs.

"Bolster up jobs", or was it to bolster up people's income?

[papa smurf]

Originally Posted by nomadking

"Bolster up jobs", or was it to bolster up people's income?

An important part of the business support measures, provided by the government to help business during the economic crisis created by coronavirus pandemic, is the Coronavirus Job Retention Scheme (or ‘furlough leave’). Furlough leave is a temporary leave of absence for economic reasons and is designed to save jobs.

[Pierre]

Originally Posted by Hugh

And not forgetting, if it's a US company doing the LBO (even of a UK company), there's a huge tax benefit.

One of the reasons Virgin Media is so valuable to Liberty Global, and why the Vodafone deal was never done.

Virgin Media is heavily leveraged.

[nomadking]

Originally Posted by papa smurf

An important part of the business support measures, provided by the government to help business during the economic crisis created by coronavirus pandemic, is the Coronavirus Job Retention Scheme (or ‘furlough leave’). Furlough leave is a temporary leave of absence for economic reasons and is designed to save jobs.

The furlough scheme was an alternative to businesses making people redundant. Otherwise the businesses would've had to be paying out to staff without any money coming in. It was only aimed at people's wages, not any other business costs.
Link

The government’s Coronavirus Job Retention Scheme (CJRS) has so far helped protect more than 9.3 million jobs through the pandemic, with employers claiming more than £25.5 billion to support wages.

Link

More than nine million workers who are unable to do their job because of the coronavirus outbreak have had their wages paid by the government.
The furlough scheme was designed to help people put on leave because of the outbreak, and prevent mass redundancies.

[papa smurf]

Originally Posted by nomadking

The furlough scheme was an alternative to businesses making people redundant. Otherwise the businesses would've had to be paying out to staff without any money coming in. It was only aimed at people's wages, not any other business costs.
Link


Link

An important part of the business support measures, provided by the government to help business during the economic crisis created by coronavirus pandemic, is the Coronavirus Job Retention Scheme (or ‘furlough leave’). Furlough leave is a temporary leave of absence for economic reasons and is designed to save jobs.

N.B This may not be true for employees of tin foil hat manufacturers.

[1andrew1]

Originally Posted by Hugh

And not forgetting, if it's a US company doing the LBO (even of a UK company), there's a huge tax benefit.

It doesn't need to be just a US company, interest payments are a cost which reduce a company's profits upon which corporation tax is paid (or not).

---------- Post added at 13:12 ---------- Previous post was at 13:10 ----------

Originally Posted by heero_yuy

This is despite having taken government (our) money to bolster up jobs.

If they took it in poor faith then I think that criticism might be justifiable, but there's nothing to suggest they did.