Scolly
Well-Known Member
Probably the most tasteless comment for any number of reasons
Bavaria in administration?
- Thread starter bitbaltic
- Start date
Probably the most tasteless comment for any number of reasons
MapisM
Well-Known Member
Re: Bavaria in administration
But if that was actually made, I also do agree with the essence of your reply! :encouragement:
Well, I didn't read the question as meant to ask the reasons why companies and their stakeholders (shareholders aside), becomes AOTBE structurally weaker after an LBO. So, yes, in this respect I definitely didn't address such question.
But if that was actually made, I also do agree with the essence of your reply! :encouragement:
MapisM
Well-Known Member
Re: Bavaria in administration
But if you forgive me for quoting (and focusing on) just a couple of your statements, well, don't you think that you eventually answered yes to your own question...?
Right and wrong are concepts for which the answer is at least to some extent down to personal views.
But if you forgive me for quoting (and focusing on) just a couple of your statements, well, don't you think that you eventually answered yes to your own question...?
MapisM
Well-Known Member
dom
Well-Known Member
Re: Bavaria in administration
Indeed, so I wld argue that we are facing a legislative failure where the 'legitimate' price discovery process can in some instances operate against the interests of important stakeholders. Should the legislature perceive this to be unfair it is perfectly free to change the rules. Blaming a PE Co.here and a hedgie for the current debt drenched market seems like a convenient distraction. Just a personal view of course
Right and wrong are concepts for which the answer is at least to some extent down to personal views.
But if you forgive me for quoting (and focusing on) just a couple of your statements, well, don't you think that you eventually answered yes to your own question...?
Indeed, so I wld argue that we are facing a legislative failure where the 'legitimate' price discovery process can in some instances operate against the interests of important stakeholders. Should the legislature perceive this to be unfair it is perfectly free to change the rules. Blaming a PE Co.here and a hedgie for the current debt drenched market seems like a convenient distraction. Just a personal view of course
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wotayottie
Well-Known Member
Absolutely. Likely Bavaria will rise again because the Germans see it as important to support their companies and industries. Inn the UK , the bones would be picked apart by receivers after all the fees they can generate and baks after their money - the workers and the national interest dont matter.
The result? We have no worthwhile boat building industry and the Germans do. Same with cars or mateials or chemicals etc etc.
JumbleDuck
Well-Known Member
What new model? Anyway, as Tranona pointed out, Bavaria didn't do "stock" - they built to order in a matter of weeks. I can't see that any explanation besides "outdated range, deep discounting, poor sales and production difficulties" is needed.
JumbleDuck
Well-Known Member
I'm not sure that willy-waving about LBOs is really much better than a couple of comments about keels.
JumbleDuck
Well-Known Member
Any number? Could you maybe outline just six reasons?
Tranona
Well-Known Member
Indeed. The issues are at one level simple and at another much more complex.
In essence they have been caught by a (relative) collapse in sales of models for which they have more than enough capacity, and a shortage of capacity for the new style boats for which they have plenty of orders - hence the need for greater investment in new facilities that the owners are reluctant to fund. The investment in new models and facilities at the same time as a reduction in cash flows from the older models is what has caused the "crisis" - or more properly the lack of agreement on how to deal with it. In many ways not dissimilar from Oyster bar the big potential liability from the failed boat.
As for building for stock, like many mass producers they commit to build X number of boats several months ahead, some against confirmed orders from dealers, usually presold to end consumers, others in anticipation of sales to dealers. They will firm up actual builds 2 or 3 months in advance and if it looks like there will be some unallocated by the time they are built will try to get buyers for them, perhaps with incentives. Dealers may be encouraged to take for stock and/or there will be incentives offered to end users supported by the factory.
That is exactly what happened when I bought my boat in 2015. In April there was an offer for up to 5 boats of the model I was considering for build in July, and if ordered by end of May could be exactly to buyer's spec. The combination of the factory offer, a sharing of the gain from the exchange rate, FOC extras and a part exchange on my old boat resulted in an effective discount on the 2015 list price of well over 15%. So the important thing to me was that I exchanged a well used 13 year old 37 for a fully specced new 33 for well under £60k. The new owner of the old boat is also a happy bunny, having carried out a refit for not a lot of money and taken the boat to Spain.
Coming back to 2018 Bavaria have just run a promotion on the older style boats with up front discounts of between 8-10% on list, but of course for buyers paying in sterling the list price has been severely hit by the fall in the value of the £. It was 1.36 Euros to £ when I paid for mine, 1.14 now. The 2018 list in the UK is well over 30% higher than 2015, which explains in part the fall in demand in the UK, but I understand the European market has also dropped with charter fleets cutting their replacement schedule as well as private buyers being more cautious.
Sybarite
Well-Known Member
It was my experience that nearly as many businesses went bust because of over-trading rather than under-trading.
They couldn't find the working capital to fund their receivables. This was especially problem in France where everything closed down in August.
MapisM
Well-Known Member
Re: Bavaria in administration
Understanding that something is unfair and being able to make that clearly illegal and prosecutable are two different things in practice, the latter being not that easy even for legislators - again, we aren't talking of folks who sell drug to kids, here.
Otoh, if the whole public opinion would be fully aware of the real nature of the beast, and would understand how detrimental it is to a fair and sustainable development (also in a capitalist system, mind! Mine ain't an ideological point by any stretch of imagination), maybe the legislators would have more reasons to be stronger...
Which I fully agree they weren't enough so far though, if that's what you are underlining. :encouragement:
Funny that you should see my comments as a distraction, considering that my very first post in this thread (#67) addressed exactly this point, if you re-read it.Indeed, so I wld argue that we are facing a legislative failure where the 'legitimate' price discovery process can in some instances operate against the interests of important stakeholders. Should the legislature perceive this to be unfair it is perfectly free to change the rules. Blaming a PE Co.here and a hedgie for the current debt drenched market seems like a convenient distraction. Just a personal view of course
Understanding that something is unfair and being able to make that clearly illegal and prosecutable are two different things in practice, the latter being not that easy even for legislators - again, we aren't talking of folks who sell drug to kids, here.
Otoh, if the whole public opinion would be fully aware of the real nature of the beast, and would understand how detrimental it is to a fair and sustainable development (also in a capitalist system, mind! Mine ain't an ideological point by any stretch of imagination), maybe the legislators would have more reasons to be stronger...
Which I fully agree they weren't enough so far though, if that's what you are underlining. :encouragement:
Blue Sunray
Well-Known Member
Willy waving? I refer you to my my point about juvenile comments. The difference between the moboer's posts about matters financial and some of the armchair naval architects posting here is that the former actually have professional expertise and first hand knowledge of the subject matter as opposed to (with a few honorable exeptions) amateurish conjecture in the latter case.
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dom
Well-Known Member
Re: Bavaria in administration
Apologies, didn't mean to imply your comments were a distraction; in fact I largely agree with you. I was referring to the legislators who happily duck behind those parts of the media which seek to blame a constituency of investors for the side-effects of cheap money. Speak to the central bankers and they see the argument for near-zero rates, QE, credit easing, etc. in largely theoretical monetary terms.
The problems you describe are all too real, but they are the side-effects of a world swimming in easy money. One can only presume that the relevant legislatures and central bankers deem it a price worth paying; and that they just can't quite bring themselves to admit that.
Apologies, didn't mean to imply your comments were a distraction; in fact I largely agree with you. I was referring to the legislators who happily duck behind those parts of the media which seek to blame a constituency of investors for the side-effects of cheap money. Speak to the central bankers and they see the argument for near-zero rates, QE, credit easing, etc. in largely theoretical monetary terms.
The problems you describe are all too real, but they are the side-effects of a world swimming in easy money. One can only presume that the relevant legislatures and central bankers deem it a price worth paying; and that they just can't quite bring themselves to admit that.
MapisM
Well-Known Member
Re: Bavaria in administration
Yup. From a macroeconomic standpoint, I couldn't agree more with your views - and your hopes too...!
Yup. From a macroeconomic standpoint, I couldn't agree more with your views - and your hopes too...!
MapisM
Well-Known Member
LOL, good point indeed.
Beside, let's be honest, what's wrong with a bit of virtual willy waving on a forum?
Some of us are old enough to be fully aware that hoping to succeed to my compatriot Rocco Siffredi in his impressive, non-virtual career would be wishful thinking to say the least...
CCJ
Well-Known Member
LOL, good point indeed.
Beside, let's be honest, what's wrong with a bit of virtual willy waving on a forum?
Some of us are old enough to be fully aware that hoping to succeed to my compatriot Rocco Siffredi in his impressive, non-virtual career would be wishful thinking to say the least...
If one is somewhat inadequate in the willy dept, then it is now possible to wave someone else`s about http://www.bbc.co.uk/news/world-us-canada-43873058
JumbleDuck
Well-Known Member
Yeah, well, a bunch of people all saying I've-leveraged-more-buyouts-than-you might be smoking fat cigars, but they are still undoubtedly willy-waving, Particularly since it's painfully clear that only a couple actually know what they're talking about.
dom
Well-Known Member
Here is a clear explanation and comprehensive explanation of how the City used to work:
https://www.youtube.com/watch?v=mzJmTCYmo9g
Well worth a watch
Some might say old habits die hard!
jfm
Well-Known Member
Re: Bavaria in administration
1. We might be at crossed purposes. I said "invoked" meaning to use the rights that the FA gave them. Nothing to do with infringement.
I agree with you that FA based security is used widely in LBOs, but my point is that it rarely has any effect. It normally turns out to be completely pointless. It is a last resort tool for the lenders and normally they will choose to restructure or sell the shares they bought, etc, rather than seize the assets of the acquired company. They didn't attack the assets ("exploit" to use your word) in ferretti, for example. So my point is, when have you ever seen the FA structure actually get used? It's a life raft ( for undeserving people in your view, but let's just park that point for a second!) and so very rare for it to be used and for anyone to suffer from it.
Finally, I don't see it is as bad as you think. It allows bank leaders to queue jump ahead of other creditors like component suppliers and employees (within limits) but it is policed by auditors in a way designed to ensure that it will not be invoked within one year, by which time component suppliers are all new and so provided credit with their eyes open, and similar point can be made of employees. There is a strong case to be made that it's isn't unfair, though it is a complex argument. Doesn't exist in USA by the way!
2. The test was set by Jez and was "healthy return". Please don't move goalposts! I don't think you can name ten. let's make it two. The only cases you'll find if you know this deeply are returns made midway through the life of an investment then a few years later the investment fails due to a market shift, disruptive completion or whatever. I don't that is morally bad and btw I don't think it is what Jez meant. I'd hope you don't think that the pension funds whose money was invested by Permira should give back their dividends/returns received back in 2004 from Ferretti solely because the market changed in 2008 and after that the thing went downhill. You could argue for that, but I wish you well on the world stage for investment capital if you do. So I restate the challenge to name but 2. No worries if you don't want to - I've kinda made the point I want to which is that there can be daily mail comments that criticise things that didn't actually happen.
3. I won't struggle. I just write what I think then move on.
You gotta decide what you really want though, at a macro level. The world needs big businesses in many cases (car making, large industrials, healthcare, etc) due to need for large capital to risk or economies of scale etc. So far mankind has only developed 4 ways to own them. A= private family/trust like Mars, Rolex,Heineken, whatever. B. Public markets. C. Managed pools of capital i.e. Private equity. D state ownership/nationalised industry. If you're happy to live without C then that is a free choice but you will lose the discipline of shareholders (not managers) being in charge- the crucial flaw in B. I think we need all 4 to keep the other 3 honest so I think C has a big part to play, and is unquestionably a major contributor to pensions funding which is a global problem. Now there are detailed points that could be discussed (e.g. Your concern on FA) but let's not say the whole of C is an evil thing in society that needs stopping ( perhaps I'm exaggerating what you're arguing for but I hope you get my point)
All meant in friendly spirit of debate and I agree better discussed over a beer than keyboard! (And I restate my personal interest/non impartiality of course).
Answering the 3 blocks above separately:Perleease... Of course I can't name any case where some PE firm were so silly to formally infringe FA rules.
I wasn't even aware that this ever happened. Care to name and shame those folks? Mickey Mouse & Associates maybe?
My point was that in ANY leveraged buyout the target company assets are exploited as collateral for financing the whole transaction - which ultimately means financing the shareholders' interests.
And this is what the SUBSTANCE (as opposed to how these transactions are FORMALLY engineered) of FA is all about.
Btw, I feel in a sort of surrealistic situation while writing this, because not only I'm teaching grandma to suck eggs, but I'm doing it because asked by grandma herself...
Ref. your other challenge to name 10 cases where PE shareholders left companies (and their employees, suppliers, etc.) on their knees while they managed to get away with just a few superficial scars (if that), you'd better not bet that I can't. But as I already said, that's something I'd happily debate over a beer, rather than here.
Otoh, I appreciate your recognition that in the only example I made (just because already discussed here), there was "something odd"...
And you know perfectly that the point made by Jez remains valid regardless of whether those crooks managed to get an healthy return or just a reduction of their losses, when the latter is achieved to the detriment of other stakeholders rights - staff and suppliers particularly.
Anyhow, I have a funny feeling that you will struggle to convince anyone that this is just a "Daily Mail point" aimed at selling more copies without caring a lot about direct evidence, regardless of my willingness to post other examples.
The fairy tale of financial investors capable to turn around Blue Star Airlines and the likes, making the world economy grow faster and everybody happy in the process, is well past its due date by now... :ambivalence:
1. We might be at crossed purposes. I said "invoked" meaning to use the rights that the FA gave them. Nothing to do with infringement.
I agree with you that FA based security is used widely in LBOs, but my point is that it rarely has any effect. It normally turns out to be completely pointless. It is a last resort tool for the lenders and normally they will choose to restructure or sell the shares they bought, etc, rather than seize the assets of the acquired company. They didn't attack the assets ("exploit" to use your word) in ferretti, for example. So my point is, when have you ever seen the FA structure actually get used? It's a life raft ( for undeserving people in your view, but let's just park that point for a second!) and so very rare for it to be used and for anyone to suffer from it.
Finally, I don't see it is as bad as you think. It allows bank leaders to queue jump ahead of other creditors like component suppliers and employees (within limits) but it is policed by auditors in a way designed to ensure that it will not be invoked within one year, by which time component suppliers are all new and so provided credit with their eyes open, and similar point can be made of employees. There is a strong case to be made that it's isn't unfair, though it is a complex argument. Doesn't exist in USA by the way!
2. The test was set by Jez and was "healthy return". Please don't move goalposts! I don't think you can name ten. let's make it two. The only cases you'll find if you know this deeply are returns made midway through the life of an investment then a few years later the investment fails due to a market shift, disruptive completion or whatever. I don't that is morally bad and btw I don't think it is what Jez meant. I'd hope you don't think that the pension funds whose money was invested by Permira should give back their dividends/returns received back in 2004 from Ferretti solely because the market changed in 2008 and after that the thing went downhill. You could argue for that, but I wish you well on the world stage for investment capital if you do. So I restate the challenge to name but 2. No worries if you don't want to - I've kinda made the point I want to which is that there can be daily mail comments that criticise things that didn't actually happen.
3. I won't struggle. I just write what I think then move on.
You gotta decide what you really want though, at a macro level. The world needs big businesses in many cases (car making, large industrials, healthcare, etc) due to need for large capital to risk or economies of scale etc. So far mankind has only developed 4 ways to own them. A= private family/trust like Mars, Rolex,Heineken, whatever. B. Public markets. C. Managed pools of capital i.e. Private equity. D state ownership/nationalised industry. If you're happy to live without C then that is a free choice but you will lose the discipline of shareholders (not managers) being in charge- the crucial flaw in B. I think we need all 4 to keep the other 3 honest so I think C has a big part to play, and is unquestionably a major contributor to pensions funding which is a global problem. Now there are detailed points that could be discussed (e.g. Your concern on FA) but let's not say the whole of C is an evil thing in society that needs stopping ( perhaps I'm exaggerating what you're arguing for but I hope you get my point)All meant in friendly spirit of debate and I agree better discussed over a beer than keyboard! (And I restate my personal interest/non impartiality of course).
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