The Co-operative Group will highlight the urgency of sweeping governance reforms this week as it reveals the extent of its financial woes with a record £2bn-£2.5bn pre-tax loss, the Financial Times reported. The loss, set to be announced on Thursday, will cap a torrid 12 months for the mutual, saddled with high debt and facing a weakened management team after two senior directors quit. It includes a £1.3bn shortfall at the Co-op Bank, which the group owned in its entirety until a recapitalisation in December reduced its stake to 30 per cent. The group is also expected to announce significant writedowns on the value of Somerfield, the supermarket chain it bought in 2008. The loss – by far the worst in the mutual’s 170-year history – makes it unlikely that the group will be able to find the £120m required to take up its share of a £400m rights issue that will shortly be launched by the bank, according to people familiar with the situation. It may instead choose to sell some of its rights and use the proceeds to buy shares in a process known as “tail-swallowing”. However, its stake in the lender is likely to be diluted further. Read more. (Subscription required.)
Daily Insolvency News Headlines
Mon., April 14, 2014
The Adelaide company that 18 months ago became the first to face a board spill under the controversial 'two strikes' rule on executive pay has fallen into voluntary administration with debts of more than $100 million, Business Spectator reported on an Australian story. Penrice Soda Holdings appointed McGrathNichol as a voluntary administrator to allow the business to continue to trade and to achieve fresh financing to continue its turnaround strategy under chief executive Guy Roberts. A fortnight ago the group secured a heads of agreement with a new lender for a debt restructure and refinancing planned for the end of this month. But following due diligence the agreement has been terminated and the new lender opted not to proceed with the proposal. Penrice has been hit hard by the high Australian dollar, reducing receipts from its US-dollar export earnings and increasing import competition in its local markets. Last year it closed of its Australian soda ash manufacturing in favour of an import-distribution joint venture. Read more.
Properties formerly owned by building and engineering group Siac are to be sold after one of its banks took control of three companies split from the group earlier this year, the Irish Times reported. Bank of Scotland has appointed receivers Paul McCann and Stephen Tennant of Grant Thornton to three property-holding firms that formed part of Siac before its rescue from examinership in February by long-standing shareholders, the Feighery family, its directors and two other businesses. The move does not affect the operating company, Siac Construction, which emerged from examinership in February after the Supreme Court threw out a last-minute challenge to a rescue plan devised by Mr McCann’s and Mr Tennant’s colleague, Michael McAteer, appointed examiner to the group in October. Bentoba Property Rentals, MC Eco Park and Rotago Baldonnell, which owned property in Dublin, Meath and Laois, that were owned or developed by Siac and financed by the lender seven years ago. Bank of Scotland has also recruited Green Property Management to oversee the sale. All the properties are the subject of mortgages given by the bank to various Siac group companies in February 2007. Under the High Court approved rescue plan, Siac’s property interests and contracting companies were split in two. This allowed the operating businesses, controlled by Siac Holdings Ireland and including Siac Construction, to form a new debt-free group. Read more.
Sirkka Hamalainen, Finland’s first female central bank governor and a founding member of the European Central Bank, is returning to the region’s highest policy circles to help reshape its banks, Bloomberg News reported. “The only thing which is still missing in the banking union structure is the question of how to deal with too-big-to-fail banks,” Hamalainen said in an interview in Helsinki on April 11, three weeks before taking up her role as a member of the ECB’s new Supervisory Board. “The link between the banks and the sovereigns will never be totally and finally broken, but certainly it will be weakened crucially. The principle that the losses are socialized and the profits privatized can’t be accepted in the future. Both must be privatized.” The ECB, founded in 1998 to conduct monetary policy, is about to become Europe’s most powerful financial watchdog in response to a crisis that almost destroyed the single currency it was created to defend. Hamalainen, 74, was appointed in March to the new panel, which will run financial supervision directly for about 130 of Europe’s biggest banks from November. Read more.
Punch Taverns, Britain’s second biggest pubs group, has brought in an independent corporate restructuring expert to aid long-running discussions over its £2.3bn debt mountain, The Telegraph reported. Dean Merritt, from Talbot Hughes McKillop, is representing the companies that issued Punch’s debt, amid hopes a deal that is agreeable to all lenders and shareholders can be thrashed out by the beginning of next month. Punch, which will publish its interim results tomorrow [15 April], and its lenders have been embroiled in a long-running saga over how to restructure its complex web of debt, which was amassed during an acquisition spree last decade under previous management. The board of the publicly-listed company published its first proposals on how to tackle the £2.3bn debt overhang, which is contained in two complex securitisations, in February 2013 but its plans were met with opposition from both senior and junior bondholders, despite revisions. A vote in February this year was pulled just days before it was due to take place after it became clear that lenders with blocking votes would oppose a revised deal tabled by Punch’s executive chairman, Stephen Billingham. The pubs group last week called for more time to allow talks to continue and lenders have been asked to approve covenant waivers to avoid a debt default. Read more.
Strauss Innovation, a German chain of small department stores, has attracted several potential buyers after it sought court protection from creditors in January to try to rescue its business, a German magazine said on Saturday, quoting its administrator, Reuters reported. Andreas Ringstmeier told weekly WirtschaftsWoche some of the interested parties were financial investors with experience in retail industry and had already submitted their indicative bids. Hans Peter Doehmen, who is advising Strauss on restructuring, told the magazine there was a good chance that creditors would get some of their money back. "Our goal is to get binding offers in April, conclude an agreement in May and present the investor by June at the latest," he said. Read more.