interestrateripoff Posted January 20, 2009 Share Posted January 20, 2009 http://business.timesonline.co.uk/tol/busi...icle5551164.ece JD Wetherspoon, the pubs group, has axed its dividend and called a halt to almost all corporate spending over fears it will not be able to re-arrange a loan of nearly £100 million that comes due in September.The company's lead lender is Royal Bank of Scotland (RBS), whose shares collapsed by 67 per cent yesterday after revealing it expects full-year losses to hit £28 billion — the worst loss in UK corporate history. Tim Martin, the chairman and founder of Wetherspoons, said that his company was in a good financial shape, with relatively low gearing by comparison with other pub companies. Last year, free cashflow reached £72 million and Wetherspoon spent £17 million on dividend payments. But in the uncertainty surrounding the banks and the possible unavailability of finance, his board had taken the decision to cut spending, including on new pub openings, in order to repay the loan out of cash flow. "It's illustrative of a larger issue," he told The Times. "We don't know that we couldn't re-arrange it (the loan), but it wouldn't be a good time to bet." Wetherspoon's concern on the availability of financing, even for a robust and well-capitalised business, will be shared by directors of other companies with loans falling due. Yesterday, RBS pledged to increase its lending to customers by £6 billion, boosted by the £5 billion in additional capital the bank will receive when the Government increases its stake in the lender from 58 per cent to 70 per cent. Paying off your debts with profit, no there's a novelty. No doubt because they are taking the sensible long term view the share price will fall. Quote Link to comment Share on other sites More sharing options...
bagsos Posted January 20, 2009 Share Posted January 20, 2009 http://business.timesonline.co.uk/tol/busi...icle5551164.ecePaying off your debts with profit, no there's a novelty. No doubt because they are taking the sensible long term view the share price will fall. Share price was in the doldrums anyway so they may as well axe the dividend; the shares in JDW rose 9% on this news. I would think that many other yield stocks will be thinking along the same lines at the moment. Is this the end of the WACC theory I wonder - it does seem to have become somewhat redundant now? Quote Link to comment Share on other sites More sharing options...
VeryMeanReversion Posted January 20, 2009 Share Posted January 20, 2009 Companies are now changing state from profit-maximisers to debt-reducers. Survival first, proftits second. Individuals are figuring it out too. Once in this state, its tough for any economic policy to get people spending again. VMR. Quote Link to comment Share on other sites More sharing options...
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