Building firm in administration - and blaming RBS

Generali

Alan_M wrote: »

Actually that's our biggest hurdle (perception/confidence) and two months ago I would have agreed and had almost resigned myself to the fact we were closing.

However in the last month business is back to 2007 levels. I have no idea where it's coming from nearly all my customers are reporting the same increase which is puzzling but very welcome. The trouble is the bad period of the last 6 months has sucked up so much of our reserves that it could be too little too late.

Presumably you can't finance the increased levels of business out of cash flow as otherwise you wouldn't have a problem.

Get over to fool and try this board: DAK (aka Does Anybody Know). Somebody will push you in the right direction.

http://boards.fool.co.uk/Messages.asp?bid=50937

You could also try:

http://boards.fool.co.uk/Messages.asp?bid=51109&mid=11476945

It doesn't get much traffic but some of my favourite posters are on that board. LePetitFou for example.

If you have a chance and you do post over there, please PM me your username or keep us updated over here.

I wish all the very best.

Alan_M_2

nykmedia wrote: »

Thank you for this brief lesson, I am aware of the meaning of solvency and insolvency but I, personally, disagree with the concept that a company can remain solvent when its cash flow depends on maintaining or increasing it's financial liability to the bank. If that looks like happening then an attempt to liquidate a percentage of assets should be made before reaching crisis point. Perhaps it's the cashflow calculation that's wrong. Perhaps the overheads and running costs have been miscalculated and/or mis-managed, perhaps the company involved, in this case, Wrekin, hadn't counted on high penalties imposed, perhaps we could debate all day about the solvency or insolvency of a company but it still remains a fact that a good cashflow will NOT keep a company afloat if it isn't solvent at any give time.

As a business owner, running costs, assets and a high enough turnover to service all overheads and borrowings would be my main concerns, primarily to take the company out of debt as soon as possible. Crazy, yet simple, as this may sound, it's the only thing protecting a company from a panic-stricken lender. We only need to look to Woolworth's former empire to see what can happen to a company that doesn't balance assets and overheads against running costs and servicing debts.

With regards to owning/running a business, I'd scrupulously and ruthlessly analyse the overheads and running costs regularly, liquidate a percentage of assets to reduce current debt and diversify wherever possible in an effort to open up new income channels, regardless of how small. I wouldn't be looking to transfer or extend the debt unless it was a cost-cutting exercise that fell within the realms of 'solvency'. Goodwill is not a tangible asset, so it has no value in my equation.

Just out of interest, what do you do with your offcuts and discarded 'waste' products?

Whilst what you are suggesting would be lovely in a Utopian business world, sadly it just doesn't exist. There is not one single reason for this..but many that have slowly crept up on us over the years.

Take a walk down any high street and pick any recognised business like Marks and Spencer or Dixons say...and find me one that operates with no borrowing...there won't be a single one....

The business world as we know it simply wouldn't exist as we know it if no one borrowed.....some might say that would be a good thing...others might suggest it's little too close to communism to be comfortable.

Alan_M_2

Generali wrote: »

Presumably you can't finance the increased levels of business out of cash flow as otherwise you wouldn't have a problem.

I could now things have picked up, but what hurts us is the lead time of our product....three months from order ...whilst we could restock from existing cashflow it's not quite enough, we need to buy a little more to maintain a stock level that generates sales for us to continue operating..

In short we could buy at current levels but it would simply move the problem along three months rather than solve it.
I'll take a look at the links and see if it will be of any help, I'm always open to suggestions.

Generali

Alan_M wrote: »

we could buy at current levels but it would simply move the problem along three months rather than solve it.

It may be the Macawber approach but it isn't such a bad last ditch thing. The Bank of England is 'printing' an awful lot of money, a little of that may find itself heading in the direction of Alan M with luck.

Alan_M_2

Generali wrote: »

It may be the Macawber approach but it isn't such a bad last ditch thing. The Bank of England is 'printing' an awful lot of money, a little of that may find itself heading in the direction of Alan M with luck.

The only upside of this route is it does give another three months in which to solve the problem so with the recent increase in business it's not as mad as it would have sounded only a month or so ago.....

I'm not going to roll over and give up because things are difficult, but I'm also realistic and I won't trade on blindly hoping it will all go away.

Debt_Monkey_3

http://www.ft.com/cms/s/0/e7a878aa-100c-11de-a8ae-0000779fd2ac.html?nclick_check=1

This is why RBS were not willing to supply any further credit, they dont even know if the companies main asset exists and even if it does, it is unlikely to be worth the amount the company believe.

Alan_M_2

Debt_Monkey wrote: »

http://www.ft.com/cms/s/0/e7a878aa-100c-11de-a8ae-0000779fd2ac.html?nclick_check=1

This is why RBS were not willing to supply any further credit, they dont even know if the companies main asset exists and even if it does, it is unlikely to be worth the amount the company believe.

For those not registered on FT.com

An ordinary tale of business collapse has taken an extraordinary turn with the revelation that a medium-sized Shropshire construction business was the purported owner of an £11m ruby called “The Gem of Tanzania”.
When Wrekin Construction went into administration this week, directors lambasted the company’s bank, Royal Bank of Scotland, which is majority-owned by the government.
What has now come to light is a jaw-dropping note to the 2007 accounts of the civil engineer. This reported that Wrekin bought the ruby from shareholder Tamar Group for a “fair value” of £11m paid in interest-bearing preference shares. The transaction revived Wrekin’s parlous balance sheet, making it easier to stay in business.
The ruby would be one of the most valuable gems on the planet. Ernst & Young, the administrators of Wrekin, would therefore like to know where it is. So would Wrekin’s 80 creditors. Because these include RBS, every taxpayer in the country has a small indirect interest.
It is not known whether RBS’s decision to grant a £4.25m overdraft facility was influenced by the borrower’s ownership of the gem. The assets of builders rarely extend beyond hard hats and pneumatic drills.
Christie’s said the highest recorded price paid for a ruby was $3.6m (£2.6m) in 2006.
Key directors of Wrekin were unavailable for comment on Friday. Their PR man had resigned in protest at not being paid.
David Unwin Jnr, managing director of Tamar Group, was available instead. He is the son of David Unwin Snr, ultimate owner of both Wrekin and Tamar. When asked “Where is the ruby?” he replied “no comment”, as he did to the inquiry “Does this ruby really exist?”
Note 13 of Wrekin’s 2007 accounts states: “The fair value of the ruby gemstone was determined by a professional valuer at the Instituto Gemmologico Italiano (sic) based in Valenza, Italy, on 31 August 2007.”
Loridana Prosperi, a gemmologist at the head office of the Istituto Gemmologico Italiano in Milan, said: “That is impossible, because we were on holiday on August 31 2007.”
She said IGI never assesses the price of gemstones, only the quality – and the Valenza office does not even do that.
Ms Prosperi said an £11m ruby would be equivalent to “The Black Prince”, a jewel the size of a chicken’s egg in the Queen’s crown. She said she would like to get a look at “The Gem of Tanzania”. She is not the only one.



So the first question that springs to mind (after of course the two questions asked above...i.e where is it? and Does it actually exist?)

Did the bankers really advance this kind of money to a company who claims to own the most expensive Ruby in history, without actually asking for either an appraisal or a sneaky look even (due dilligence anyone?)

However more importantly......has Sir Fred Goodwin made an interesting sideways move in gem dealing?.......;)

Alan_M_2

For sale....Rare ruby...ideal for Bank Collateral....

http://cgi.ebay.co.uk/ws/eBayISAPI.dll?ViewItem&item=260377321564

Frugaldom

I hope the reserve is high enough to deter the buyers - just in case! :rotfl: I remember checking out the bids for the paper plane and the invisible car, so I wouldn't put it past some to get into a bidding war. I'm sure eBay pursued the sellers for the fees, too. :eek: :rotfl:

dopester

Alan_M wrote: »

When asked “Where is the ruby?” he replied “no comment”, as he did to the inquiry “Does this ruby really exist?”

Note 13 of Wrekin’s 2007 accounts states: “The fair value of the ruby gemstone was determined by a professional valuer at the Instituto Gemmologico Italiano (sic) based in Valenza, Italy, on 31 August 2007.”

Loridana Prosperi, a gemmologist at the head office of the Istituto Gemmologico Italiano in Milan, said: “That is impossible, because we were on holiday on August 31 2007.”

She said IGI never assesses the price of gemstones, only the quality – and the Valenza office does not even do that.

Ridiculous. Here I am with good honest money to invest for business assets, to restructure and get things moving - at the right price which takes in to account prevailing and projected market conditions........ and yet on the first two pages of this thread it is obvious the main sympathy is with Wrekin.. and how supposedly unfair RBS has been by calling time on the company.

Defies belief that people who prefer to keep the old-guard in power no matter what their excesses, no matter if their business plans have failed, no matter what the cost to lenders or the taxpayer.