This is a bit of a delayed reaction post, in response to the news that Gordon Brown has offered Barclays (amongst other banks) a #7.5 billion refinancing package to get themselves out of their sticky financial situation.
This is the same Barclays that three years ago pushed my company Red Letter Days into administration on the grounds that we were an 'unacceptable risk' and they had to 'answer to their shareholders' - despite the fact they held #4.3 million in cash and other securities against a liability which eventually proved to be little more than #1million.
The same Barclays (which I have since learned through the numerous emails I have received from other entrepreneurs) which has the worst reputation of ANY UK BANK for ruthlessly pulling the plug on great British businesses which could otherwise have been saved.
The same Barclays that just two years ago posted a #7 BILLION PROFIT.
The same Barclays that just TWO WEEKS AGO danced Lehmans up the garden path - only to withdraw at the 11th hour and then go back in to cherry pick the assets, like a graverobber picking over the contents of the coffin while the corpse was still warm.
The fact that we are now offering #7.5 billion of TAXPAYERS' MONEY to bail this greedy, power hungry, ruthless bank out of financial difficulty is a total and utter disgrace and insult to the British people.
I say LET BARCLAYS CRASH - as they have allowed (forced?) so many other UK businesses to crash - then pick the entire business out of administration, sell off the assets and use the #7.5 billion (if it is needed) to supplement any funds which are needed to ensure depositors' monies are protected.
Give the b*stards a taste of their own medicine.
Showing posts with label Barclays. Show all posts
Showing posts with label Barclays. Show all posts
Friday, 10 October 2008
Sunday, 21 September 2008
Why things must change...
My last post generated some interesting comments; here's my take on what's going on.
Mass consumerism is a very recent thing, it started post-war and really gathered momentum in the 1970's - suddenly it seemed you could have anything you wanted, but at a price. People started getting very rich - and as those of you have been rich will know - it is very addictive; you always want more.
So us entrepreneurs found cleverer and cleverer ways to entice you to buy more - brilliant marketing, enticing ads, messages that our product would make you sexier, thinner, more attractive. Fashion cycles accelerated and as soon as you had the latest thing, it wasn't the latest thing anymore - so was given to Oxfam. The world's resources started being consumed at an alarming rate.
And of course people's earnings could not keep up with the rampant demand, so a handy little thing called credit was introduced to enable the whole machine to continue being fed. The economy continued to expand, Gordon Brown crowed about his 'stable economy' and 'record growth' and for a while everything in the garden was very rosy.
But in the gold rush for more business, the financial institutions started getting a little reckless and started lending to people who really, really couldn't afford it. And so the inevitable started - defaults on loans, people posting the keys of their houses back through their bank's letterbox, thousands forced into bankruptcy and thousands more choosing it as an easy option to wipe their debt.
And the cancer of this 'sub-prime' debt spread throughout the banking sector as institutions swapped liabilities, undermining the whole financial system.
Hoping the problems were isolated, bits and pieces of government and institutional intervention followed; Northern Rock, Bradford and Bingley, RBS, Barclays, Merrill Lynch, AIG all bailed out in some shape or form. And now the US suddenly finds $800billion to try to solve the problem once and for all, the stock market shoots up, the traders breathe a sigh of relief - and everyone starts gambling again.
But it's obvious that this rampant consumerism can't continue.
There isn't enough money to feed the monster (especially now people are losing their jobs as well as their homes), there aren't enough resources in the world to feed the monster (especially now people are running scared through global warming), there isn't enough time to feed the monster (people are working harder and faster just to stand still) - and what's more, none of it is making anyone happy.
Plus how many crises and wars can the US rustle up the money for before the country itself becomes bankrupt?
Meantime, there is a growing awareness of the unfairness of a 'many to one' system in which capitalism allows a small number of individuals to share the spoils at the expense of the many billions who live on our planet in poverty, too weak to be able to fight their oppressors.
So, to me, the predicted 'Apocalypse' is not anything about an asteroid colliding with Earth, it is about the necessary breakdown of the current way of working to allow a new world order to come in.
My view is that this new world order will be able to meet every one's needs (not greeds) in a much fairer and collaborative way, in harmony with the planet and one another. Already there is an awakening of the 'collective consciousness' which is calling people towards a more spiritual way of existing.
Our human efforts to change things (what one might call the 'low energy light bulb' approach) are not enough to cut it; when the Universe finally delivers the solution mankind needs (and we are just starting to glimpse the changes now) it will deliver in a spectacularly powerful and infinitely intelligent way.
Mass consumerism is a very recent thing, it started post-war and really gathered momentum in the 1970's - suddenly it seemed you could have anything you wanted, but at a price. People started getting very rich - and as those of you have been rich will know - it is very addictive; you always want more.
So us entrepreneurs found cleverer and cleverer ways to entice you to buy more - brilliant marketing, enticing ads, messages that our product would make you sexier, thinner, more attractive. Fashion cycles accelerated and as soon as you had the latest thing, it wasn't the latest thing anymore - so was given to Oxfam. The world's resources started being consumed at an alarming rate.
And of course people's earnings could not keep up with the rampant demand, so a handy little thing called credit was introduced to enable the whole machine to continue being fed. The economy continued to expand, Gordon Brown crowed about his 'stable economy' and 'record growth' and for a while everything in the garden was very rosy.
But in the gold rush for more business, the financial institutions started getting a little reckless and started lending to people who really, really couldn't afford it. And so the inevitable started - defaults on loans, people posting the keys of their houses back through their bank's letterbox, thousands forced into bankruptcy and thousands more choosing it as an easy option to wipe their debt.
And the cancer of this 'sub-prime' debt spread throughout the banking sector as institutions swapped liabilities, undermining the whole financial system.
Hoping the problems were isolated, bits and pieces of government and institutional intervention followed; Northern Rock, Bradford and Bingley, RBS, Barclays, Merrill Lynch, AIG all bailed out in some shape or form. And now the US suddenly finds $800billion to try to solve the problem once and for all, the stock market shoots up, the traders breathe a sigh of relief - and everyone starts gambling again.
But it's obvious that this rampant consumerism can't continue.
There isn't enough money to feed the monster (especially now people are losing their jobs as well as their homes), there aren't enough resources in the world to feed the monster (especially now people are running scared through global warming), there isn't enough time to feed the monster (people are working harder and faster just to stand still) - and what's more, none of it is making anyone happy.
Plus how many crises and wars can the US rustle up the money for before the country itself becomes bankrupt?
Meantime, there is a growing awareness of the unfairness of a 'many to one' system in which capitalism allows a small number of individuals to share the spoils at the expense of the many billions who live on our planet in poverty, too weak to be able to fight their oppressors.
So, to me, the predicted 'Apocalypse' is not anything about an asteroid colliding with Earth, it is about the necessary breakdown of the current way of working to allow a new world order to come in.
My view is that this new world order will be able to meet every one's needs (not greeds) in a much fairer and collaborative way, in harmony with the planet and one another. Already there is an awakening of the 'collective consciousness' which is calling people towards a more spiritual way of existing.
Our human efforts to change things (what one might call the 'low energy light bulb' approach) are not enough to cut it; when the Universe finally delivers the solution mankind needs (and we are just starting to glimpse the changes now) it will deliver in a spectacularly powerful and infinitely intelligent way.
Friday, 8 August 2008
WrapIt Crashes
You may have seen the news that WrapIt, the wedding gift list company, went into administration this week after its credit card takings were bonded by its bank.
Exactly the same scenario that happened to Red Letter Days in 2005 and Farepak in 2006.
In Red Letter Days' case, Barclays bonded £3million of the company's cash (as well as holding a further £1.25million in other security against their perceived contingent liability on experience vouchers purchased by credit card), causing a cashflow crisis which forced the company into administration.
12 months after the company crashed, the cost of fulfilling the vouchers claimed by customers (and bear in mind the media surrounding the collapse caused a huge run on vouchers) was less than £1.5million. The rest of the bonded money, instead of going to the company's creditors, went as a 'bonus' to the new owners of the company. This was a deal done by Barclays and the administrators which to my knowledge was never reported to the creditors.
The practice of 'bonding' a company's takings in the way that happened to RLD and Farepak and WrapIt will almost always certainly cause the business to fail. Its quite easy to see why the bank takes the action it does, justifying that it needs to protect itself in the event the company fails but this always becomes a self-fulfilling prophecy.
If we are to prevent similar business failures, the legality of the practice of 'bonding' should immediately be reviewed by DBERR. In my view bonding acts to make the bank a preferential creditor which I believe under current insolvency law is illegal.
If credit card facilities are extended to a company without bonding terms (effectively giving that company the ability to utilise revenue as working capital, upon which they will then base their financial forecasts) then banks simply should not be allowed to alter the terms of the agreement down the line, at least not without a minimum of 12 months' notice.
Exactly the same scenario that happened to Red Letter Days in 2005 and Farepak in 2006.
In Red Letter Days' case, Barclays bonded £3million of the company's cash (as well as holding a further £1.25million in other security against their perceived contingent liability on experience vouchers purchased by credit card), causing a cashflow crisis which forced the company into administration.
12 months after the company crashed, the cost of fulfilling the vouchers claimed by customers (and bear in mind the media surrounding the collapse caused a huge run on vouchers) was less than £1.5million. The rest of the bonded money, instead of going to the company's creditors, went as a 'bonus' to the new owners of the company. This was a deal done by Barclays and the administrators which to my knowledge was never reported to the creditors.
The practice of 'bonding' a company's takings in the way that happened to RLD and Farepak and WrapIt will almost always certainly cause the business to fail. Its quite easy to see why the bank takes the action it does, justifying that it needs to protect itself in the event the company fails but this always becomes a self-fulfilling prophecy.
If we are to prevent similar business failures, the legality of the practice of 'bonding' should immediately be reviewed by DBERR. In my view bonding acts to make the bank a preferential creditor which I believe under current insolvency law is illegal.
If credit card facilities are extended to a company without bonding terms (effectively giving that company the ability to utilise revenue as working capital, upon which they will then base their financial forecasts) then banks simply should not be allowed to alter the terms of the agreement down the line, at least not without a minimum of 12 months' notice.
Wednesday, 6 August 2008
Red Letter Days still in the Red
Last week was a painful anniversary for me - 1 August 2005 was the date my first company Red Letter Days went into administration, 16 years after I founded it.
An administration which could have been avoided had I managed to raise £2million in equity to match a bank finance offer from HBOS of £2million before I ran out of time. The company of course already had £3.3million cash at bank (most of it held in bond by Barclays which they wouldn't let us touch) so the additional injection would have given it the liquidity it needed to trade through, correct its various problems and then float on AIM.
Interesting therefore to see the latest accounts of the new Red Letter Days just filed - which show a £2.8million loss to 30 September 2007 - that's cumulative losses of nearly £10million (£13million if you exclude the £3million handed to the new owners on a plate by Barclays) since the company was acquired out of administration for the 'bargain' price of £250k.
Losses which are, of course, still being blamed on the old company, despite the fact that most of the old company's vouchers expired on 31 July 2005 and those remaining in retail all expired well before the end of the previous accounting period.
The sad fact is that pushing an ailing company through an administration process is a really tempting trap. The thinking goes: wipe the debt, take the brand and everyone's a winner - except of course the old owners.
The reality is that the administration process DESTROYS huge amounts of value.
In Red Letter Days' case, as a result of the high profile media fallout the brand was severely damaged, it caused a run on voucher claims - which the voucher owners would probably have forgotten about if the crash hadn't been so high profile - and the majority of the suppliers had to be paid out anyway because there is a finite number of experience suppliers in the UK, and these suppliers refused to honour any new bookings unless all old debts were paid.
Think how much cheaper it would have been for the new owners just to have injected the £2million equity required (which, under the circumstances, would have secured a massive equity stake), let the company recover and then sell it on a year or two later at a massive premium (our Brokers predicted, given the profile of the brand, that the float value would have been c£25million).
But then sometimes greed just gets the better of people.
An expensive mistake to make!
And a reason why I urge the government to review the current administration and insolvency laws - which often act against the growth of UK enterprise.
An administration which could have been avoided had I managed to raise £2million in equity to match a bank finance offer from HBOS of £2million before I ran out of time. The company of course already had £3.3million cash at bank (most of it held in bond by Barclays which they wouldn't let us touch) so the additional injection would have given it the liquidity it needed to trade through, correct its various problems and then float on AIM.
Interesting therefore to see the latest accounts of the new Red Letter Days just filed - which show a £2.8million loss to 30 September 2007 - that's cumulative losses of nearly £10million (£13million if you exclude the £3million handed to the new owners on a plate by Barclays) since the company was acquired out of administration for the 'bargain' price of £250k.
Losses which are, of course, still being blamed on the old company, despite the fact that most of the old company's vouchers expired on 31 July 2005 and those remaining in retail all expired well before the end of the previous accounting period.
The sad fact is that pushing an ailing company through an administration process is a really tempting trap. The thinking goes: wipe the debt, take the brand and everyone's a winner - except of course the old owners.
The reality is that the administration process DESTROYS huge amounts of value.
In Red Letter Days' case, as a result of the high profile media fallout the brand was severely damaged, it caused a run on voucher claims - which the voucher owners would probably have forgotten about if the crash hadn't been so high profile - and the majority of the suppliers had to be paid out anyway because there is a finite number of experience suppliers in the UK, and these suppliers refused to honour any new bookings unless all old debts were paid.
Think how much cheaper it would have been for the new owners just to have injected the £2million equity required (which, under the circumstances, would have secured a massive equity stake), let the company recover and then sell it on a year or two later at a massive premium (our Brokers predicted, given the profile of the brand, that the float value would have been c£25million).
But then sometimes greed just gets the better of people.
An expensive mistake to make!
And a reason why I urge the government to review the current administration and insolvency laws - which often act against the growth of UK enterprise.
Monday, 17 March 2008
What if?
Mr Badger is not a happy man today. He works in the banking software sector and one of his biggest clients is Bear Stearns...
But the banking sector has every reason to be worried after this weekend's events across the Pond.
Did you know that banks in this country are only required to hold 5% of customer deposits in liquid cash reserves? That means if more than 5% of their customers decide to withdraw their cash and put it under the mattress certain banks might just possibly run out of money. (I discovered this when my FD at Red Lettter Days was arguing against Barclays' rationale to bond 100% of our credit card takings - a £3million pot of money we couldn't touch, which eventually brought the business down due to lack of cash. All it took was a loss of confidence via a few negative media reports, suppliers subsequently withdrawing credit and within days the whole company had collapsed.)
Of course the banks could always pull in monies they have lent out - but with the property market destabilised and so many people in huge credit card debt, just how much of it could they collect without putting scores of people through bankruptcy?
And if the banks run out of cash what happens to all the people who need to get their hands on it?
Sorry to be all doom and gloom, but it would seem to me things are in a very precarious state.
Time to start stocking up on food and planting a vegetable patch...
But the banking sector has every reason to be worried after this weekend's events across the Pond.
Did you know that banks in this country are only required to hold 5% of customer deposits in liquid cash reserves? That means if more than 5% of their customers decide to withdraw their cash and put it under the mattress certain banks might just possibly run out of money. (I discovered this when my FD at Red Lettter Days was arguing against Barclays' rationale to bond 100% of our credit card takings - a £3million pot of money we couldn't touch, which eventually brought the business down due to lack of cash. All it took was a loss of confidence via a few negative media reports, suppliers subsequently withdrawing credit and within days the whole company had collapsed.)
Of course the banks could always pull in monies they have lent out - but with the property market destabilised and so many people in huge credit card debt, just how much of it could they collect without putting scores of people through bankruptcy?
And if the banks run out of cash what happens to all the people who need to get their hands on it?
Sorry to be all doom and gloom, but it would seem to me things are in a very precarious state.
Time to start stocking up on food and planting a vegetable patch...
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