Bavaria in administration?

[Sticky Fingers]

Re: Bavaria in administration

Latest info from Bavaria. Not much we didn't expect I guess..

Self-administration ordered – production and deliveries to continue as normal
• Self-administration means: executive management has full legal authority
• Wages and salaries will be secured until June 2018 using insolvency compensation
• Restructuring expert Dr. Tobias Brinkmann from Brinkmann & Partner joins executive management
• The goal of the process is to implement an investor solution
In accordance with the application of the Bavaria Yachtbau GmbH, the district court of Würzburg yesterday ordered provisional self-administration. Dr. Hubert Ampferl of the law firm Dr. Beck & Partner has been appointed interim administrator.
The shipyard operations will continue seamlessly over the next few months. The delivery season is currently in full swing, so that it will be possible to process a large order backlog over the coming months. “In the current situation, we will continue to provide our customers with the customary high quality,” says Erik Appel, COO. The existing executive management is being expanded to include Dr. Tobias Brinkmann, a specialist insolvency lawyer and partner in the national law firm Brinkmann & Partner. He has extensive experience of reorganising shipyards. The previous CEO, Lutz Henkel, left the executive management last week.
The top priority is now to search for an investor. “We have many years of experience building high-quality yachts and are industry leaders in technology in many areas,” says Appel. Against the background of the good market positioning, the company is seeking to address both strategic as well as financial investors. The procedure is intended to put operations on a sound financial footing.
The first operational restructuring steps, such as the introduction of clear organisational structures in production, have already been implemented. These activities will be continued consistently.
Bavaria Yachtbau GmbH was founded in 1978 and is among the market leaders in European yacht building. Payment of wages and salaries for the months of April to June 2018 will be secured by insolvency compensation. The some 600 employees have been informed in detail.
The petition for insolvency refers exclusively to the Bavaria Yachtbau GmbH. The French subsidiary Bavaria Catamarans SAS in Rochefort will continue to operate as normal.
Giebelstadt, 24 April 2018

 

[Heckler]

I'd be interested to see their accounts too.

How often have we seen something which has been bought by private equity investors using high levels of leverage which becomes insolvent, not because there is anything fundamentally wrong with the fundamental business model, but because the business has been dragged down by the millstone of debt which has been hung around it's neck by virtue of the way it's acquisition has been financed.

You have hit the nail on the head!
Stu

 

[MapisM]

Re: Bavaria in administration

Mapism, I totally agree the above
...
Time for a beer!

Well, it's good that we are fully aligned on really important topics, I reckon! :encouragement:
Any chance to eventually show me Match in flesh this summer?
Btw, if you would do Sardinia, you might come across also BA and her great crew, as I understood from B.
Ourselves, we'll be in CF a bit later than usually, around end of Jul/beginning of Aug, after the delivery trip.

Meanwhile, here's my take on some of your points, fwiw:

It isn't illegal - in most countries it is illegal unless you do certain things, but everyone does those things.
Of course you can argue that the law is weak and the "things" are too easy, but that's a different debate.

LOL, very nicely worded, but it isn't a different debate.
If you read again my very first post of this thread (#67) this is precisely what I said, in reply to Jez.
Besides, the fact that getting round the law formally is easy doesn't restrict us from recognizing that the substance of these transactions goes against a legal (and imho very sound) principle, if we are honest.

Don't you have to debate whether any non trivial amount of debt is a bad thing?
I don't personally think it is, and when I was 22 I borrowed literally 100% mortgage to buy first house, but each to their own on debt.

Interesting to hear that, because when I did the same, we (myself and S) collected as much savings as we could first, and eventually applied for a mortgage in the order of magnitude of 70% (can't remember exactly, 'twas some 35 years ago...). Besides, by the time the purchase was formalized, we were able to reduce it further, after scraping the bottom of the barrel.
Different mentality, I suppose. But I'm not blaming you for borrowing more anyway, far from that.
You already knew before asking that I have absolutely nothing against financing per se, when it's based on real needs and solid foundations - so to speak, since we have now drifted to houses...
But do tell, what's your take on the derivatives that all the sharpest knives in the banks' drawers packed upon mortgages?
If there's one single economic reason for them, aside from making bankers richer, I for one am completely missing it.

"proportionally more at stake for its staff and suppliers than for the shareholders" - I'm afraid that is true of #A,B,C+D. Big public companies/PLCs, big family owned companies, perhaps most companies. Nothing at all to do with PE ownership.

Sorry, can't agree with this.
Sure, also with A/B/D the wealth inequality constantly widened, over time.
But avoiding that would imply shifting to socialism, which wouldn't be such a bad idea on paper, if it weren't that in practice it never worked well, anywhere on this planet.
Otoh, what is very peculiar of C is that widening this gap is an inherent objective of the PE investment logic.
In fact, "making money out of money alone" is the true essence of PE, without caring one bit about the business sustainability, vulnerability, and so forth.
It's almost the opposite, arguably: each business is just seen as a trading item, to be bought at the lower possible price, with the goal of reselling it as quickly as possible.
Which is sick, and doesn't exist in A/B/D. It can happen also there of course, but it ain't the inherent nature of the beast, as it is in C.
Btw, I wasn't aware that my statement in brackets has ever been used by the Daily Mail.
But if you tell me that it was, well, maybe they aren't such poor journalists, all considered...

a large stack of today's technology was incubated and grown in PE ownership.

Aaah... Beautiful wording, again!
If "incubated" sounds to any native EN speaker the way it does to my ears, that's very reassuring indeed.
John Fortune (RIP) pops to mind in this case: I love "enhanced". I'd buy anything if it's enhanced...
Otoh, if we say that some (not sure I'd call it a "large stack", but that's irrelevant) technological startups were considered by PE firms worth risking a tiny amount of money in view of a potentially stellar ROI, aren't we closer to the naked truth?
Which is, yet again, making money out of money alone...

 

[MapisM]

Re: Bavaria in administration

Two points on us ‘Category C’ inmates if I may:
...

Wow dom, if you wanted to make life easier for JD in identifying who is his second person who knows a thing or three on these matters, your post will do, I reckon.
Aren't you by chance thinking to spend some holidays in Sardinia this summer? It would be nice if you could join myself and jfm for that beer debate!

There's not much I'm wishing to comment on your thoughts, which by and large are cogent, but I think it's useful to put what I said so far in perspective.
FIrst of all, I never said that C is the one and only culprit of all the economic distortions of the days we live in.
I'm well aware that also politicians and many other players are to blame for what they did (or omitted to do) in many cases. Btw, don't you think that also rating agencies deserve a place in your list?
But this opens an even larger can of worms.
The somewhat smaller one I was focusing on is derived by this thread, and by the fact that during my working life I spent several years not only with C, but also with privately owned and public corporations (A and B, to stick to jfm classification).
No first hand experience on D (nationalized industries), but based on what I understood from some close friends, I don't think I missed a lot.

The whole financial world which you are commenting on is something I occasionally had to deal with of course, but when I say "had to" you can also read "was obliged to", i.e. with not much enthusiasm, tbh.
So, it's also because of lack of interest that I didn't threw into the debate also central banks, politicians, whatever - not because I think "they" are good, as opposed to C who are bad.
If my comments came across that way, it wasn't my intention, by any stretch of imagination.

What I know for sure, and not just on the basis of my own experience but also through exchanges with a fair number of other CEOs and CFOs which I met, with whom I shared a similar experience, is that while between A and B there are several distinct differences, C is in another league altogether.
The former have their pros and cons obviously, but at least both look at the business also with a strategic approach, at least to some extent.
For the latter, the clock of the strategic horizon is tuned on the need to delay the payments to the suppliers at the end of each quarter in order to meet the cash covenants (among other similar cr@p, the list could be long!).
And by the time year end approaches, their focus is shifted to finding excuses for postponing to the next year any provision which should be done, according not only to common sense but also IAS/IFRS (not to mention auditors - theoretically... ), because they want to come out with a nicer EBITDA to present to the next buyer... :ambivalence:

All that said, just a couple of points among those you raised:

1) Ref. the eyebrows of Bundesverfassungsgericht, do you possibly have an idea of why they didn't raise them when their iron frau thought that it was a good idea to put a whole Country on its knees just in order to teach a lesson to others? If you have any direct contact with them, I'd be delighted to hear why their ethic principles weren't so strict in that occasion (and also others involving DB, btw).

2) When you say "if we accidentally wreck an investment or make a mistake we lose our own money, wreck our reputation, and our clients kick us up the backside", "we" is meant as PE firm partners, I suppose?
If so, forgive me if I'm not too moved. Making some mistakes is a normal part of the PE game, which is in fact engineered in the best possible way to minimize their negative effects.
Let me try to translate your sentence in how it could be written by an old style entrepreneur: "If I wreck my company, I lose everything, and my whole life is ruined".
Pick your poison...

 

[dom]

Re: Bavaria in administration

All that said, just a couple of points among those you raised:

1) Ref. the eyebrows of Bundesverfassungsgericht, do you possibly have an idea of why they didn't raise them when their iron frau thought that it was a good idea to put a whole Country on its knees just in order to teach a lesson to others? If you have any direct contact with them, I'd be delighted to hear why their ethic principles weren't so strict in that occasion (and also others involving DB, btw).

2) When you say "if we accidentally wreck an investment or make a mistake we lose our own money, wreck our reputation, and our clients kick us up the backside", "we" is meant as PE firm partners, I suppose?
If so, forgive me if I'm not too moved. Making some mistakes is a normal part of the PE game, which is in fact engineered in the best possible way to minimize their negative effects.
Let me try to translate your sentence in how it could be written by an old style entrepreneur: "If I wreck my company, I lose everything, and my whole life is ruined".
Pick your poison...

My second point was airy fairy and I accept your comments.

Ref the Bundesverfassungsgericht and ethics; I’m not a lawyer but get the impression that the Constitutional Court is highly legalistic in its interpretation of German Basic Law, of which the no fiscal transfer and no monetisation rule (Articles 125, 123, etc) are almost sacrosanct. Re the iron frau; well Germany has always viewed the periphery (and especially Greece) through the lens of human morality which intertwines the ideas of Hayek and Martin Luther.

Harvard’s Steven Ozment puts it well (u/l mine):

“Consider Luther’s view on charity and the poor. He made the care of the poor an organized, civic obligation by proposing that a common chest be put in every German town; rather than skimp along with the traditional practice of almsgiving to the needy and deserving native poor, Luther proposed that they receive grants, or loans, from the chest. Each recipient would pledge to repay the borrowed amount after a timely recovery and return to self-sufficiency, thereby taking responsibility for both his neighbors and himself. This was love of one’s neighbor through shared civic responsibility, what the Lutherans still call “faith begetting charity.”​

Greece was basically a story of a dysfunctional state, which the European Commission misdiagnosed as a dysfunctional banking system. The EC/IMF/ECB went on to blow the 2010 rescue and in doing so further enrich a small minority, for corruption was deeply embedded within the Greek State. A small number of vested interests sponsored politicians in return for favourable new legislation and the capricious enforcement of existing laws. These politicians would in turn capture local civil servants who were told to rigorously enforce only those rules and regulations which didn’t challenge the vested interests. The EU’s legal experts consequently advised that much of what the EU regards as tax evasion is in fact perfectly legal avoidance, at least in the eyes of Greek Law. What was the EU to do, loans from Germany’s Lutheran Chest would never be repaid !!

The EU is of course institutionally incapable of taking decisions which challenge its great euro dream. So, it impoverished Greece’s citizens and tried to blame their plight on inherent defects within the Greek national character. Finally, the population rallied behind Syriza, a motley collection of grandstanders, Marxist dreamers and general nutters. These were useful fall guys with few friends and who were duly crushed.

The German banking system would have been destroyed by massive Greek writeoffs, so what followed was a fudge where the ‘loans’ were wrapped into the ESM, EFSF, EC ‘loans’ to Greece, the last of which will be repaid in 2080! The Bundesverfassungsgericht is the watchdog here, aware that the ECB’s involvement is taking it right up to the boundary of the Article 123 ban on monetary financing and the EU right up against the boundary of Article 125. The ethical position (as perceived by Germany) is that Greek citizens elected its previous governments and must now (inc. future generations) pay the price, at least if it wants to remain in the euro, they must.

Might there be another reason why countries like Spain, Portugal, and Greece owe so much money to Germany?

Well how about this in the interests of balance? It won’t walk in a German Court, but as you mention ethics :ambivalence::

We all know Germany looks after its Mittelstand much better than the UK and one might even view Bavaria Yachts through this lens. Germany has long dreamt of a large systemic trade surplus and has a history of joining currency unions, then trying to outcompete its stable-mates in order to gain a competitive advantage over them. Early attempts, Breton Woods, EMU, etc. ended in failure with the German trade surplus collapsing to zero after their demise. Further pain came in the form of losses to its foreign investments: inflation, currency, writeoffs, etc. What Germany needed was a permanent Doppelgänger, which one might say it found in the form of the euro.

Soon after joining Germany restructured its labour laws (Harz reforms of 200 and all that) and coupled with world-beating efficiency its unit labour costs fell. But the German ‘export weapon’ is more than a story about cheap labour.

Next policymakers devised government policies to encourage SMEs and Mittelstand companies to acquire characteristics associated with export success. A quasi-state-subsidised trade support network was spawned, which includes DE Trade & Invest, Fraunhofer and many universities. Fraunhofer for example spends over €2bn p.a. to amongst other things help German SMEs engage in research they could not otherwise afford.

“German SMEs are rarely left home alone” is a common refrain in Berlin and this nurturing policy has clearly borne fruit. A 2012 a study identified 1,200 German Mittelstand companies which held either the number one position in the European market, or the number one/two position within the global market for their products. This was far far above the level which was statistically expected. These policies gradually turned Germany into an export powerhouse, especially within the high- and ultra-high-complexity space.

By the early 2000s, faced with the German export weapon, countries like Spain (a soberer example than Greece) had a textbook case for capital controls – of course illegal under EU law. By the mid-2000s Spain faced a stark choice: its tradable goods sector laid low by the German export machine, it had to choose between accepting a structural rise in unemployment, or trying to somehow absorb Germany’s excess savings. Politically there was no option other than to channel the flood of German liquidity into its construction and service sectors.

There can be no surprise that these sectors became bloated, corrupt and inefficient as the years rolled by. Colossal amounts of foreign capital are always misallocated when it flows into domestic dark spaces where it should never have ventured.

Why on earth should current and future citizens in the periphery accept austerity and unemployment far higher than 2008 in an attempt to pay back the vast sums of money that hapless Landesbanken and Volksbanken staffers had miss-invested?


Edit: apols for massive fred drift, but at least Bavaria Yachts is mentioned

 

[MapisM]

Interesting reading, you must be professionally focused on the German market, I suppose.
Otherwise, if you could write similar analyses for any Country, you'd get my vote as official economist of the asylum... :encouragement:

No objections to anything you wrote, which by and large match my views nicely.
I would just answer your very last question (though I'm well aware that it's purely rethorical) by saying that in fact, they don't.
And some election results of the last years are there to prove it.
Which is what most short-sighted politicians fail to appreciate, and quite often, when in a hole, just keep digging.
When leading a Country where everyone is entitled to a vote which counts as much as anyone else's (a principle I never fully agreed with, for the records), you can keep doing something which goes against the interest of the majority of people, but that's bound to come to an end, sooner or later - even if the change that follows ain't necessarily for the better... :ambivalence:

 

[dom]

I would just answer your very last question (though I'm well aware that it's purely rethorical) by saying that in fact, they don't.
And some election results of the last years are there to prove it.
Which is what most short-sighted politicians fail to appreciate, and quite often, when in a hole, just keep digging.
When leading a Country where everyone is entitled to a vote which counts as much as anyone else's (a principle I never fully agreed with, for the records), you can keep doing something which goes against the interest of the majority of people, but that's bound to come to an end, sooner or later - even if the change that follows ain't necessarily for the better... :ambivalence:

Agreed, and the fact that politicians don't understand that can-kicking alley is finite is simply amazing -- or perhaps they do and just hope the end doesn't come on their watch!

Re Germany, the interface between what's happening at a macro level there and elsewhere, and corporates operating below is a fascinating space for investors. But that's the point regulation absolutely stops speculation on a public forum :ambivalence:

Looks like it's beers time

 

[MapisM]

Looks like it's beers time

Just say when! :encouragement:
Unfortunately, I have no plans to come to the Land of hope and glory in the near future, but if by chance you would be around Milan (in the next month or so) or Sardinia (from Aug onward), gimme a shout.
I'd gladly contribute to the chat with something much better than beer, if you fancy IT food and wines...

 

[JumbleDuck]

Hey, yachties, at least we now know what the motorboaters talk about instead of anchors.

Motorboaters, an "anchor" is that small piece of bent metal up at the pointy end.

 

[Tradewinds]

JD give it a rest - it's boring.

Hey, yachties, at least we now know what the motorboaters talk about instead of anchors.

Motorboaters, an "anchor" is that small piece of bent metal up at the pointy end.

 

[JumbleDuck]

JD give it a rest - it's boring.

Feel free to report it to the moderators if you are very, very upset. What sort of anchors do Bavarias come with anyway? I'm guessing Bügel.

 

[Tranona]

Feel free to report it to the moderators if you are very, very upset. What sort of anchors do Bavarias come with anyway? I'm guessing Bügel.

No. Used to be rubbish copy CQR, but now genuine Lewmar Deltas.

 

[dom]

Just say when! :encouragement:
Unfortunately, I have no plans to come to the Land of hope and glory in the near future, but if by chance you would be around Milan (in the next month or so) or Sardinia (from Aug onward), gimme a shout.
I'd gladly contribute to the chat with something much better than beer, if you fancy IT food and wines...

IT food and wines - hard to resist I love Milan in the late spring; in fact it's dreary morning in London today and wld happily head to the airport right now

However, if I find myself anywhere near Sardinia late summer will definitely give you a shout. Ditto if you're passing through Old Blighty!

 

[dom]

Hey, yachties, at least we now know what the motorboaters talk about instead of anchors.

Motorboaters, an "anchor" is that small piece of bent metal up at the pointy end.

But JD you rarely post on the anchor threads and as a frontier scientist/engineer something keeps drawing you back here!

So can I ask you a question. Businesses, finance folk and universities all get in each others' hair sometimes; that much is clear On the other hand there is much to be gained when all three play nicely together and Germany, Japan and the US all kind of get that.

Germany currently spends almost $90bn a year on research and development compared to the UK's $38bn. Yet the German economy is only 40% larger. Bavaria alone outspends Russia!!

Would such an outcome be desirable for the UK?

 

[MapisM]

Hey, yachties, at least we now know what the motorboaters talk about instead of anchors.
Motorboaters, an "anchor" is that small piece of bent metal up at the pointy end.

Actually we used to talk about anchors too.
But eventually, we realized that for some reason glorious weather follows us wherever we go...
So, it doesn't really matter what sort of stuff is hanging from the chain - even a brick would do.
And the debate shifted towards the best position of the anchor camera (aka AnCam), which the most sophisticated among us invented with the aim of keeping our drink handy at the helm while dropping and recovering the hook... :encouragement:

 

[Rob_Webb]

Back to the realities of the current situation.

Anyone here got a new Bavaria on order?

My friend has and it seems to be getting messy...

 

[JumbleDuck]

Actually we used to talk about anchors too.
But eventually, we realized that for some reason glorious weather follows us wherever we go...

You jammy sods. From the last three years' sailing I am beginning to think I am a rain god, a la Douglas Adams. Ah well, one day I'll get the Botnia Targa I yearn for (there is one in the marina at Bangor after which I have been lusting for years) and it will all be sunshine for me too then. Unless I really am a rain god, but at least I'll have windscreen wipers.

 

[Resolution]

But JD you rarely post on the anchor threads and as a frontier scientist/engineer something keeps drawing you back here!

So can I ask you a question. Businesses, finance folk and universities all get in each others' hair sometimes; that much is clear On the other hand there is much to be gained when all three play nicely together and Germany, Japan and the US all kind of get that.

Germany currently spends almost $90bn a year on research and development compared to the UK's $38bn. Yet the German economy is only 40% larger. Bavaria alone outspends Russia!!

Would such an outcome be desirable for the UK?

Dom
It has been a pleasure for us retired bankers to read your posts on this thread. Can't understand a word of it, but great to see a friendly debate of such sophistication.
All the best from a warm Gokova Korfesi.
Peter

 

[JumbleDuck]

But JD you rarely post on the anchor threads and as a frontier scientist/engineer something keeps drawing you back here!

So can I ask you a question. Businesses, finance folk and universities all get in each others' hair sometimes; that much is clear On the other hand there is much to be gained when all three play nicely together and Germany, Japan and the US all kind of get that.

Germany currently spends almost $90bn a year on research and development compared to the UK's $38bn. Yet the German economy is only 40% larger. Bavaria alone outspends Russia!!

Would such an outcome be desirable for the UK?

Absolutely. Although I work as a university lecturer, my current speciality is knowledge transfer, which basically means getting people inside and outside universities to talk to each other. Neither HE nor business exist in a void; both need the other and both need the financial world as well. Dare I say that the German propensity for investment in research seems to be driven largely by a rather different financial attitude (short term vs long term) there?

 

[halcyon]

Absolutely. Although I work as a university lecturer, my current speciality is knowledge transfer, which basically means getting people inside and outside universities to talk to each other. Neither HE nor business exist in a void; both need the other and both need the financial world as well. Dare I say that the German propensity for investment in research seems to be driven largely by a rather different financial attitude (short term vs long term) there?

Could be a interesting thread if we can get past you must have a degree to be an engineer.

For some reason we (UK) did a total U turn in education in the late 60's / 70's, the Germans did not, keeping the old system for training engineers for instance from what I read.

Is it to late to review our current system compared to our old one and the current German one ?

Brian