Phones 4u demise: 1,700 employees laid off with redundo package The axe fell on nearly 1,700 jobs at Phones 4u last night, a little over a week after the High Street retailer went into administration. It brings the total number of staff laid off with redundancy packages so far to 2,325 – nearly half of the company's workers. The staffers had been based at 700 outlets, including 550 stores …
With the TUC, I think now that if I were a Bank being asked to loan money to a Private Equity owned business, I would want to know where the money was going, and what money had gone out of the business. 200m out and then loans needed to replace it, I'd be looking to lay that risk off on the PE company. I wonder how much BC made on the deal, was that 200m the final bit to fulfil their investment return, at someone else's expense?
I am genuinely curious about the folk that lent money to BC to buy Phones 4 U. Did they structured the deal to ensure they would get their money back in it all blew up? What interest were they getting?
As to the muppets who lent the money to Phones 4 U so they could pay BC a big dividend, I expect they are fucked.
@Otto is a bear.
Private Equity business loads debt onto its buyouts to avoid paying taxes. You only pay taxes on profit, interest on debt is deducted when doing the accounts to leave much smaller profit that is then taxed. If they loan is payable to a company in a foreign country, UK gov does not get the eventual tax on the profit earned in the foreign country either.
This is a Tax Scheme / Vehicle designed to reduce tax paid in the country of earning and increase profits in the foreign country likely with a lower rate of tax than the UK.
Many companies, especially IT companies, operate this way.
In some countries such "special payments" would count as embezzlement. Not in the UK, it seems, which is why the Glazers could do the same thing with United.
The banks know exactly what the PE companies are up to as they usually invest (other people's money) in their schemes. Financial engineering usually makes the often very odd deals seem to work. In the last few years it's not been uncommon for PE companies to play pass the parcel with acquisitions in order to meet their targets.
I think there probably is a place for buyouts – taking a company off an exchange can be very helpful if it needs restructuring – but the degree of leverage should be much more restricted. Unfortunately, however, the current loose monetary policy is encouraging more of these kind of deals.
I'm curious about this redundancy package. Is this term used here solely as a euphemism for "statutory minimum", or are they getting something more?
To me, "package" implies something more, and is entirely incompatible with "we would have paid you less and treated you more badly, but it turns out that would be illegal".
What fee did PwC earn from the caper ? Who recommended administration ? What part was played by BC Partners ? Did they really just buy Phones 4u, drain it of 200m and collapse the company ? How could a dividend be paid if the company was not in profit ? What prompted 4u to seek a loan ? Why would they do so if they were in profit ? All of this will be answered in the pages of Private Eye over the next 6 months.
Shades of Pheonix/Rover here ?
My understanding is:
- margins in the mobile phone business are tight
- Vodofone/EE were looking for a reason to dump CW/P4U/both to improve their margins
- BC Partners took a lot of money out of P4U and replaced it with loans
- the increase in debt at P4U increased the risk of non-payment to phone suppliers in the event of a business default
- Vodafone/EE smile and say "sorry, but you present too high a risk of default"
- P4U loses....
- BC Partners weigh the assets stripped versus losing the business - verdict unknown
What fee did PwC earn from the caper ?
I know it is fash to hate on administrators, but really, would you take on a piece of work if you knew there was no budget to pay you? I suppose you could argue for a no-win-no-fee type arrangement with the risk hedged by insurance but that hardly worked out as some sort of ethical unicorn sanctuary for teh lawyers. It sounds, superficially, like BC Partners could be more culpable but I guess it could take time to show if that is really the case
Former P4U employee here (hence anonymity) leaving in 2006
I'm really sad that my former colleagues have lost their jobs, made some great friends there. I must admit though that I'm not that surprised that the networks ceased trading with them. Some of the tactics used by some of the sales management were less than ideal and in my humble opinion probably cost the networks a lot.
Possibly P4U should have looked at starting their own MVNO subsidiaries on a couple of networks so that they could be less dependent on pushing carrier plans.
Vodafone does not renew, then EE renegs. And then both buy up the most valuable shops between them leaving the rest to face unemployment. Complete coincidence?
1) They DID start a MVNO, called LIFE, that was probably part of the problem. They were competing with their own suppliers.
2) Neither Voda nor EE renaged on their deals, they just anounced that they wouldn't be renewing them. They did this because P4U wouldn't or most likely couldn't offer them the terms they wanted. P4U was saddled with a shed load of debt, so likely couldn't afford to do this. The shops that Voda and EE were interested in were ones that didn't clash with their own store networks, and are thus unlikely to be the most valuable.
"My only question is: how can *I* get some of this easy money?"
Easy, Just sell off your empathy, caring, and humanity*, then fill the new vacancies in with greed, greed, and greed, Job done.
* There's rumored to be a firm, Tophet Unlimited, that will take them as a bundle. I believe they call the package a 'soul'.
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