Zavvi Creditors To Be Paid Just 5pc - 10pc

[interestrateripoff]

http://www.telegraph.co.uk/finance/newsbys...d-just-5pc.html

Unsecured creditors, who are owed nearly £20m, will be paid between five and 10p in every pound, according to administrators Ernst & Young (E&Y), the accountancy firm.

The forecast payout of £1m to £2m compares to the £3.2m earned by E&Y since its appointment as administrator to the business last December.

In documents filed at Companies House, E&Y said unsecured claims from employees in respect of pay in lieu of notice and redundancy is estimated at £4.1m, with claims for voucher holders totalling £3.5m, trade creditors at £4.3m and other unsecured claims at £7.6m.

Zavvi's collapse left many voucher holders out of pocket, but the administration documents show the majority have failed to ask for compensation given the small size of any likely payout. There were 510,000 unredeemed vouchers at the time of administration worth £4.1m, although vouchers worth just £3.45m are thought to be eligible for compensation.

As of the middle of July, just 20,000 claimants owning vouchers worth £300,000 had submitted compensation claims.

E&Y has appointed Addleshaw Goddard, a law firm, to review the terms of a trust account set up by former Zavvi directors to compensate would-be customers who bought vouchers after Nov 27 last year.

Is the a normal return from a collapsed business, if bankruptcies increase we are going to see far more fantasy money disappear from the system.

[equitystasher]

So the postage to send my £20 voucher back signed for is in excess of what I am to be payed out.

Fracking theifs

[keef]

So the postage to send my £20 voucher back signed for is in excess of what I am to be payed out.

Fracking theifs

paid

thieves

thicko

[SNACR]

http://www.telegraph.co.uk/finance/newsbys...d-just-5pc.html

Is the a normal return from a collapsed business, if bankruptcies increase we are going to see far more fantasy money disappear from the system.

Could be worse, in fact. When the assets are often sold off for 10p in the pound, the return is never going to be that great. It's always been known that pushing things into bankruptcy/administration is unikely to recover much of the debt but the lesson seems to have be relearnt every decade or so.

There often seems to be more of a psychological elements of not liking the idea that the debtor company is 'getting away with a free lunch' rather than creditors acting in an objective manner to secure the biggest return.

[Guest happy?]

Could be worse, in fact. When the assets are often sold off for 10p in the pound, the return is never going to be that great. It's always been known that pushing things into bankruptcy/administration is unikely to recover much of the debt but the lesson seems to have be relearnt every decade or so.

There often seems to be more of a psychological elements of not liking the idea that the debtor company is 'getting away with a free lunch' rather than creditors acting in an objective manner to secure the biggest return.

Much to the joy of Ernst and Young. Another bankruptcy - trebles all round!

[LuckyOne]

I wonder what Zavvi (I never knew how to spell savvy), cash rich buyers of houses in this recent bear market rally are going to recover in real terms in a decade?

[Mr Yogi]

Is (this) the a normal return from a collapsed business(?)

5-10% is pretty good.

After the liquidators have taken their exhorbitant fee and the secured creditors (the bank) paid out there is very rarely anything left at all.

The sad truth is that if assets were valued at what they would fetch in a fire sale most companies are insolvent.

Zavvi's directors weren't thieves. They just paid too much for a crap business with no future and then ran it badly. The outcome was inevitable.

A voucher is an IOU. So why did these people lend Zavvi all that money?

[LuckyOne]

5-10% is pretty good.

After the liquidators have taken their exhorbitant fee and the secured creditors (the bank) paid out there is very rarely anything left at all.

The sad truth is that if assets were valued at what they would fetch in a fire sale most companies are insolvent.

Zavvi's directors weren't thieves. They just paid too much for a crap business with no future and then ran it badly. The outcome was inevitable.

A voucher is an IOU. So why did these people lend Zavvi all that money?

Very true.

This is why the "going concern" opinion from auditors is critical.

Any asset has two possible values :

- The sales price resulting from a transaction between a willing buyer and a willing seller without any financial duress.

- The price that a stressed sale could achieve.

If nothing else, the last two years have taught us just how big the difference between these two prices can be. The lesson is to only buy assets at levels that can withstand financial stress and to ensure that leverage is contained to a level that forced sales are avoided.

[SNACR]

Very true.

This is why the "going concern" opinion from auditors is critical.

Any asset has two possible values :

- The sales price resulting from a transaction between a willing buyer and a willing seller without any financial duress.

- The price that a stressed sale could achieve.

If nothing else, the last two years have taught us just how big the difference between these two prices can be. The lesson is to only buy assets at levels that can withstand financial stress and to ensure that leverage is contained to a level that forced sales are avoided.

The taxman doesn't like assets being valued at fire sale prices. It's rather hypocritical though, as if they seize them for umpaid tax all they recover is fire sale prices.

[mikeymadman]

5-10% is a good return; higher than average.

Remember that people will do anything to keep something afloat, so if there's any value left in something then they'll squeeze that out it to try and keep things going for another few months until the clouds part and the sun shines from the blue skies.

Good example would be Woolworths, which even borrowed against the value of the stock in the shops.

[tim123]

Could be worse, in fact. When the assets are often sold off for 10p in the pound, the return is never going to be that great. It's always been known that pushing things into bankruptcy/administration is unikely to recover much of the debt but the lesson seems to have be relearnt every decade or so.

There often seems to be more of a psychological elements of not liking the idea that the debtor company is 'getting away with a free lunch' rather than creditors acting in an objective manner to secure the biggest return.

Companies are usually pushed into bankruptcy by the secured creditors, they don't care what is left for the unsecured creditors

tim

[tim123]

5-10% is pretty good.

After the liquidators have taken their exhorbitant fee and the secured creditors (the bank) paid out there is very rarely anything left at all.

The sad truth is that if assets were valued at what they would fetch in a fire sale most companies are insolvent.

Zavvi's directors weren't thieves. They just paid too much for a crap business with no future and then ran it badly. The outcome was inevitable.

A voucher is an IOU. So why did these people lend Zavvi all that money?

Because it was christmas (and they were buying someone a present)

tim

[SNACR]

Companies are usually pushed into bankruptcy by the secured creditors, they don't care what is left for the unsecured creditors

tim

Secured against what? Commercial property?

Edit: It worked out ok secured against store inventory with Woolworths, but that's a one trick pony. The BBC will be unlikely to advertise another pretend half price sale for free.

Edited July 26, 2009 by Soon Not a Chain Retailer

[copydude]

Much to the joy of Ernst and Young. Another bankruptcy - trebles all round!

Absolutely.

The forecast payout of £1m to £2m compares to the £3.2m earned by E&Y since its appointment as administrator to the business last December.

That's just nonsense, surely. Can anyone afford to go bankrupt?

[Giordano Bruno]

paid

thieves

thicko

A bit harsh methinks. Especially as theifs is the way some people pronounce the word, to the extent that it is like another slang word.

[Mr Yogi]

Secured against what? Commercial property?

More likely a fixed and floating charge against the assets of the business.

Or a charge over the sales ledger in the case of a company extending credit terms to customers.

Edited July 26, 2009 by Mr Yogi

[SNACR]

More likely a fixed and floating charge against the assets of the business.

Or a charge over the sales ledger in the case of a company extending credit terms to customers.

Yep, but all of increasingly questionable value in the current climate.

That's what pulled Zavvi under. Woolies went into administration and they couldn't pay back their debt to them piecemeal, the administrator's wanted the outstanding account settled to terms immediately.

[Mr Yogi]

Yep, but all of increasingly questionable value in the current climate.

That's what pulled Zavvi under. Woolies went into administration and they couldn't pay back their debt to them piecemeal, the administrator's wanted the outstanding account settled to terms immediately.

Surely what really pulled Zavvi under is that they were a chain of record shops.

Any idiot can see that that is a business model well past its sell by date. Mr Branson is not as daft as he looks!

[Ah-so]

Absolutely.

That's just nonsense, surely. Can anyone afford to go bankrupt?

Unfortunately that is the cost of employing insolvency practitioners from a big 4. Their hourly rate is going to remain constant, so the bill will depend on the size and complexity of the insolvency.

In this case, Zavvi presumably had fairly limited assets it could realise and substantial debts. After secured lenders and E&Y have been paid, there was little left over for ordinary creditors.

E&Y presumably charged something like 10,000 hours - at the beginning every branch would have been taken over by one of their people, to either manage or shut up. The job losses would also have been handled by them. After that, a smaller dedicated team would have taken over the creditor negotiations, debt recovery, asset realisations etc. Over 6 months, big 4 billing would easily have pushed this up to £3m.

[SNACR]

Unfortunately that is the cost of employing insolvency practitioners from a big 4. Their hourly rate is going to remain constant, so the bill will depend on the size and complexity of the insolvency.

In this case, Zavvi presumably had fairly limited assets it could realise and substantial debts. After secured lenders and E&Y have been paid, there was little left over for ordinary creditors.

E&Y presumably charged something like 10,000 hours - at the beginning every branch would have been taken over by one of their people, to either manage or shut up. The job losses would also have been handled by them. After that, a smaller dedicated team would have taken over the creditor negotiations, debt recovery, asset realisations etc. Over 6 months, big 4 billing would easily have pushed this up to £3m.

The administrators from a big firm were trying to sell me the inventory of a supplier that'd gone into administration, in this case their were three sites. A skeleton staff was left in each site to facilitate the winding down and the only contact they had with the administrators, who remained ensconced in their Central London office, was one weekly telephone conference call. That was the extent of the hands on involvement of the administrators of the entire process.

My view would be they do very little work and handle the disposal of assets lazily and incompetently. They frequently ask you to bid on inventories that are just faxes, not even in spreadsheet format, with endless disclaimers about how some stock might be subject to retention of title claims or not even actually there.

[lowrentyieldmakessense(honest!)]

The administrators from a big firm were trying to sell me the inventory of a supplier that'd gone into administration, in this case their were three sites. A skeleton staff was left in each site to facilitate the winding down and the only contact they had with the administrators, who remained ensconced in their Central London office, was one weekly telephone conference call. That was the extent of the hands on involvement of the administrators of the entire process.

My view would be they do very little work and handle the disposal of assets lazily and incompetently. They frequently ask you to bid on inventories that are just faxes, not even in spreadsheet format, with endless disclaimers about how some stock might be subject to retention of title claims or not even actually there.

true but how many hours did they record for managing the stores

[buzzardo]

Surely what really pulled Zavvi under is that they were a chain of record shops.

Any idiot can see that that is a business model well past its sell by date. Mr Branson is not as daft as he looks!

He's not. But not necessarily in the direction you imply.

Watch and learn... watch and learn.

Water taxi for Mr Maxwell...?

B