Another Celebrity Chef in the Stew

Alan_M_2

Kev09 wrote: »

incidentally if your business is so great why don't you sign the personal guarantees the bank wants!

We did, and secured against personal property. As I already explained earlier on the thread. AWT wasn't prepared to do the same, and I don't blame him actually. Who knows where this mess is going.

Less than 6 months later Lloyds want increased security for no increase in facilities... probably for the reasons explained by Conrad in the post above. They are already comfortably covered even considering the drop in property value...therefore I'm not prepared to offer them more security, their position is already comfortably covered by quite some margin.

Conrad

Alan I think I'm right in saying lenders are calling in more margin in order to balance thier books. Greater exposure requires higher capital adequacy provisions, otherwise the regulators restrict lending, which leads to falling values and so on!


I recall GEC had hundreds of millions in cash and did not use Bank funding, until Marconi took it over and squandered all the cash then ended up going down.
I do come accross business' that buy all stock with cash, plus a proportion on sale or return that do not owe Banks a penny. Factoring and such like is not a feature of all business', even some large ones.

Alan_M_2

Conrad wrote: »

Alan I think I'm right in saying lenders are calling in more margin in order to balance thier books. Greater exposure requires higher capital adequacy provisions, otherwise the regulators restrict lending, which leads to falling values and so on!.

This is the only explanation that makes any sense. There are four businesses on my business park with Lloyds and we've all had the same treatment...one of them is booming, yet having it's facilities cut.

Kev09

Alan_M wrote: »

This is the only explanation that makes any sense. There are four businesses on my business park with Lloyds and we've all had the same treatment...one of them is booming, yet having it's facilities cut.

I am obviously completly missing something here! if business is booming then they should be ok that the bank is wanting some of its money back, booming would seem to suggest they wouldn't have a need for bank finance, this is exactly the reason why the banks got us in this mess, by not having enough cash to run their day to day operations! these business im sorry are obviously overstretched and need to trim back or close!

Thrugelmir

Conrad wrote: »

Alan I think I'm right in saying lenders are calling in more margin in order to balance thier books. Greater exposure requires higher capital adequacy provisions, otherwise the regulators restrict lending, which leads to falling values and so on!


I recall GEC had hundreds of millions in cash and did not use Bank funding, until Marconi took it over and squandered all the cash then ended up going down.
I do come accross business' that buy all stock with cash, plus a proportion on sale or return that do not owe Banks a penny. Factoring and such like is not a feature of all business', even some large ones.

The point you make about "cash" is correct. Businessess such as AWT's restaurant chain though is built on debt. A successful restaurant is a cash generator , as once fixed overheads are covered, the profitability increases significantly with volume. In my mind the chain was built like a BTL investor releasing equity from an inflated asset valuation to fund another property and so on and on. As the chain grew very quickly in a short space of time.

Conrad

Alan_M wrote: »

...one of them is booming, yet having it's facilities cut.

I dont' know about you, but I find it hard to tell who is booming and who isn't.

As an analogy, some big finance brokers have gone under, and they were the very ones that wne t out of thier way to broadcast thier omnipotence.

I used to be quite high up in a national broker and was always struck that the top performers were invariably quite quiet, even slightly off beam individuals, which contrasted quite starkly against those full of noise and wind that did not consistently deliver high numbers.

Thrugelmir

Kev09 wrote: »

I am obviously completly missing something here! if business is booming then they should be ok that the bank is wanting some of its money back, booming would seem to suggest they wouldn't have a need for bank finance, this is exactly the reason why the banks got us in this mess, by not having enough cash to run their day to day operations! these business im sorry are obviously overstretched and need to trim back or close!

If business is booming then the Company may indeed be overstretched financially. Companies require differing levels of working capital. Booming doesn't necessarily corralate to highly profitable or cash rich. It may just relect increased activity levels which have to be maintained for a long period to generate significant profits.

Sir_Humphrey

Thrugelmir wrote: »

The point you make about "cash" is correct. Businessess such as AWT's restaurant chain though is built on debt. A successful restaurant is a cash generator , as once fixed overheads are covered, the profitability increases significantly with volume. In my mind the chain was built like a BTL investor releasing equity from an inflated asset valuation to fund another property and so on and on. As the chain grew very quickly in a short space of time.

AWT has stated that is not the case, and that he built up the chain on retained earnings. He may be lying of course, but if he was he'd be quite easily found out.

Whether he could build up 6 restaurants like that, I do not know. I suspect yes given the large mark-ups he could charge in the 'good times' and his other income. Did he buy the restaurant buildings or rent them?

Conrad

Thrugelmir wrote: »

The point you make about "cash" is correct. Businessess such as AWT's restaurant chain though is built on debt. A successful restaurant is a cash generator , as once fixed overheads are covered, the profitability increases significantly with volume. In my mind the chain was built like a BTL investor releasing equity from an inflated asset valuation to fund another property and so on and on. As the chain grew very quickly in a short space of time.

In the long run I'm not convinced the big ballers end up better off than the tortoises that quietly build thier wealth.

I can think of quite a few quiet business owners that have significant wealth well beyond that of those in the town that would be generally considered to be sucessful business people (those noisy ones with obscene black Range Rovers that tell us all they are constantly booming).

Kev09

Thrugelmir wrote: »

If business is booming then the Company may indeed be overstretched financially. Companies require differing levels of working capital. Booming doesn't necessarily corralate to highly profitable or cash rich. It may just relect increased activity levels which have to be maintained for a long period to generate significant profits.

I think we have a different idea of booming, I consider booming to be about increased cash and profits, not turnover. Anyone could drastically increase activity and turnover by selling stuff at cost! but that would be nuts!

I think Conrad is on to something with, ive known a few guys who for them it was just about having the big X5's and corporate at the footie, they didn't have a clue about how to run a business, these are the first to go in a recession!