Happy Sunday: 8 November

Late on Friday landlords shook the shoulders of those napping at the 195 year old shoemaker, Clark’s, waking them and accused them of abusing the CVA process last week. We in the NTI newsroom are fairly sure they wanted to say: "Don't step on our blue suede shoes," but cannot be absolutely certain and do not want to publish something we cannot later verify. However, we can confidently report they did say:

"Let's dance, put on your red shoes and dance the blues."

The facts are a little curious. The landlords' debts at the 16th century shoemakers amount to £160 million, but this does not squeeze them into the 'more than 25% of creditors by value' category who could block the passing of the Arrangement.  Melanie Leech, who should be receiving counselling for the amount of anger and frustration she has been suffering on behalf of her members at the British Property Federation this year, got all red-faced again, saying that CVAs force property owners to absorb significant losses "with little attempt to build a recovery strategy". She appears to be missing the central point, that the main pillar of Clark's recovery strategy is built around most of its 320 UK stores moving to rents based on turnover. 60 stores are also moving to zero rent (which is a little more than they wanted to pay, but a compromise had to made somewhere), with all arrears built up during the pandemic going unpaid.

Daniel Butters, the grandest of grand fromages at Deloitte restructuring is reported to be kicking off talks in his Clark's Citi Stride Monks with potential buyers of its British restructuring business amid expectations of a surge in activity triggered by swathes of Coronavirus-inspired insolvencies. This heralds one of the greatest shake ups in the UK insolvency market, with KPMG peeking in on the chats they are having and looking for pointers for when it is their turn to take the headlines. 

An insider at Deloitte who refused to be named as Peter Smith said the global firm had ordered a strategic review of the UK restructuring arm, which culminated in the decision this week to allow talks about a sale to get underway. NTI have placed our bid, but don't want the offices at New Street Square, as they are a touch immoderate. We didn't particularly want to work with Michael Magnay, but he has moved on to A&M, with EY partner Joe O'Connor quitting in what is hardly a stampede of big players from the Big Four restructuring companies to join US rival AlixPartners. Private equity investors are all over businesses like the ones you are currently working in like ants on a doughnut, as the general opinion in that field of work is that businesses providing restructuring services will be especially attractive in the coming years as the UK economy grapples with the fallout from the COVID-19 crisis.

If talks about buying a major restructuring business take place in a town forty miles outside Milan the best airline to fly you directly to them would be easyJet, but you will need to check their winter schedules, as they have further cut their routes from 25 per cent of normal to 20 per cent over the winter. The prize for the most pretentious way to say something this week goes to someone in PR for the orange airline who managed to say (without smiling): "We remain focused on cash generative flying over the winter season ...", as opposed to the business the rest of us place our attention on; those parts which make no money. As a cash generating exercise they have found a market for orange Airbus 320-neos, selling and leasing back aircraft, and this week raising another £131 million in cash. This takes the total of similar deals to date above £1 billion.

We all feel sorry for Harrods, the iconic 'British' department store and erstwhile home for the fleece of the 15 million mink who have been culled due to catching their own silky brand of Covid-19 this week. In August, the Qatari-owned store renegotiated the terms of a revolving credit facility with the Qatar National Bank to avoid breaching covenants. Part of Harrods’ worst-case scenario at the point when it rejigged the covenants - the closure of its Knightsbridge flagship for four weeks (oops) - has now become a reality, putting it at risk of breaching the covenants in April.

Where else will we buy the little stocking fillers when we are allowed out again, such as a £150 drawing room diffuser, or a £400 cashmere neckerchief? In accounts filed last week, Harrods said it had sufficient cash for the foreseeable future, but were encouraging the people of Somalia to televise an 'athon' in their honour, to ensure the re-marbelling of the gents on the third floor just by the silk coating of your bathroom armchair speciality department) could still go ahead as planned. 

Managing director Michael Ward said the fundamentals of the business remained strong, but a full recovery would be impossible if the Government stuck by its plan to remove tax-free shopping for non-EU tourists. That would “have devastating repercussions on the luxury sector and the British economy as a whole”, he said. Absolutely, there is nothing more off-putting than a long queue at the VAT Re-claim Desk at Farnborough Airport, where foreign nationals wait to claim back 20% on their £150,000 alligator-wrapped tweezers before boarding their private aircraft back to the sun.