Building firm in administration - and blaming RBS

Alan_M_2

dopester wrote: »

I'm not sure it's as simple as pointing at the "value" of £multi-million pound contracts, and woo-hoo-ing that it is all the bankers fault.

Seems a lot more complicated to me. If RBS is being so unfair, why couldn't the company find other backers, or switch banking facilities to another group who would see them as a solid long term return for their money?

From an article this time last year, in which the squeeze was already being showing signs of being felt by Wrekin.



http://www.contractjournal.com/Articles/2008/03/20/58257/wrekin-construction-back-in-profit-at-17m.html

It's not like ringing up a bank and changing your personal current account.

I'm a micro business compared to the likes of these guys but I have preorders which I can't supply due to cashflow problems.

I can't just go to another bank get funded and it's all hunkey dorey, last time I changed it took 6 months before I was free of one and funded by the next one.

With a company of 600 employees the cashflow controls the company, even a profitable company (which this was despite a loss last year) cannot continue to operate if it doesn't have the facility to pay its operating costs on a short term basis.

Wrekin is a fine example of how the banks are not doing what they are instructed to do. They are not lending.

Business doesn't get any better than government contracts, it's guaranteed money in the bank....no bad debts. It's the business equivalent of winning the lottery.

I'm seeing business after business around me close due to this problem, many of them profitable for decades being killed by number crunchers sitting in an office simply instructing minions to call in all facilities on a wholesale basis.

The incompetance is continuing and all the government seemd concerned about is the size of one mans pension.

Well if they don't get a grip on what's happening and get a grip soon (i.e. force the banks to lend) it will all become pretty irrelevant anyway.

chopperharris

From what I see they would have had to have an accountant or 10 at rbs give it the once over , its a case of damned if they do damned if they dont.

In times of recession orders do get cancelled..even by the government.

Rbs main priority here is to clean out the books , call in debts , and lending is second to that , not before it.HMG main priority here is to get its money back from its investment in rbs , an investment should the bank have failed that would have broken the country as the next domino bank went right after it.

Is the company listed , then if it is then offer shares to refinance , if not then float.

Credit is not a "given" , risk is more assessed now by rbs given the hindsight , and they can always go to another bank like barcs or investment banks....in fact I suspect they will.

dopester

someone at the Royal Bank of Scotland “should be shot”

Good article from the shropshirestar.

http://www.shropshirestar.com/2009/03/10/firms-boss-blasts-the-bankers/

Overlooking whatever property stuff they are involved in, one problem seems to have been a nasty circle of debt outstanding owed to them - and they in turn owing their contractors.

“There has been a total lack of support from our bank, RBS. It started last year when we were in a situation where we had a £5 million overdraft facility.

“We have properties all over the country and there was a particular one in Bradford which we sold for £750,000, against which the bank had £280,000 borrowing secured.

Following this our overdraft facility was lowered to £4.25 million, leaving the company struggling and the credit crunch biting harder.

“In addition to this credit insurance was being removed, which was a drain on cash. For example we had a £1.25 million facility reduced to £250,000 by one of aggregate suppliers.

He added he expected the receivers to start selling off assets and contracts which had already been won by Wrekin and were on the company’s order books.

Can you blame suppliers reducing credit facilities in uncertain times, when they are fearful?

And in the Birmingham Post.

Before laying into the banks its worth seeing the other side of the story. Contractors who are themselves facing penury and business extinction are unlikely to show much sympathy for the complaints of their debtors – and who can blame them?

But still, the fact remains that a company that was still bringing in big orders – and delivering them, even if contractors weren’t paid – has been taken down while it is trading strongly. Obviously something is very wrong in the finances of a company that has unpaid bills of millions of pounds owing to the contractors that rely on it for their survival. But the directors will likely point at an overdraft limit that in more happy economic times would have been expected to cover the payments.

http://www.birminghampost.net/comment/post-comment/2009/03/11/government-shouldn-t-let-wrekin-construction-go-to-the-wall-65233-23115652/

Andrew64

This company seems to have had a straightforward cashflow problem. But they were still a good bet for the bank.

http://www.birminghampost.net/birmingham-business/birmingham-business-news/other-uk-business/2009/03/11/wrekin-construction-in-administration-as-rbs-pulls-funding-support-65233-23114119/

"A day before the company collapsed, it announced it had been awarded a contract by Defence Estates to carry out construction work at RAF Menwith Hill in Yorkshire to build new maintenance and administration facilities. Work on the RAF site was set to start later this month."

lukekelly_2

If they were as good an investment for the bank as this thread has suggested then RBS would have jumped at the opportunity. They are, after all, interested in making money and little else.

devils_advocate

Its all very well to have an order book of £90m, but it doesn't tell the whole story. If it costs £91m to deliver sales on that order book, that's a problem.

dopester

Wrekin: new owner calls it the best deal of his life

15:00 01 Nov 2007

http://www.contractjournal.com/Articles/2007/11/01/56720/wrekin-new-owner-calls-it-the-best-deal-of-his-life.html

Looks to me the Frain family sold out after 40+ years at the peak, decades of a very good run.

Do Tamar Group now regret their expansion?

Business doesn't get any better than government contracts, it's guaranteed money in the bank....no bad debts. It's the business equivalent of winning the lottery.

Other companies will pick up or tender for their government and blue-chip contracts now.

Cannon_Fodder

Radiantsoul wrote: »

I suspect they have a legal obligation to keep the employees pensions sound, but no obligation to lend.

We, the taxpayer, had no obligation to bail-out a failing bank.

I thought the point was that some things become necessary in a recession.

If the BILLIONS we have given to RBS are not reaching where they should, we might as well have let the bank fail, keeping the billions ready for unemployment/benefits of the sure to fail businesses.

Generali

Alan_M wrote: »

It's not like ringing up a bank and changing your personal current account.

I'm a micro business compared to the likes of these guys but I have preorders which I can't supply due to cashflow problems.

I can't just go to another bank get funded and it's all hunkey dorey, last time I changed it took 6 months before I was free of one and funded by the next one.

With a company of 600 employees the cashflow controls the company, even a profitable company (which this was despite a loss last year) cannot continue to operate if it doesn't have the facility to pay its operating costs on a short term basis.

Wrekin is a fine example of how the banks are not doing what they are instructed to do. They are not lending.

Business doesn't get any better than government contracts, it's guaranteed money in the bank....no bad debts. It's the business equivalent of winning the lottery.

I'm seeing business after business around me close due to this problem, many of them profitable for decades being killed by number crunchers sitting in an office simply instructing minions to call in all facilities on a wholesale basis.

The incompetance is continuing and all the government seemd concerned about is the size of one mans pension.

Well if they don't get a grip on what's happening and get a grip soon (i.e. force the banks to lend) it will all become pretty irrelevant anyway.

The trouble is, banks can't lend cash they don't have and given the limited cash they have, they have to select the best risk/reward ratio people to lend to.

This is what QE is about - trying to provide cash for banks to lend. The trouble is that in many cases, borrowers are too risky to lend to at current rates.

Cannon_Fodder

Generali wrote: »

The trouble is that in many cases, borrowers are too risky to lend to at current rates.

As many said months ago, it is not the cost of credit that was the problem. In many ways it has been too cheap to allow banks to protect themselves from borderline cases.

The problem is availability of credit. Which does not seem to have altered in 6 months.