There’s a palpable urge elsewhere in the media to see Sir Philip Green come to grief, whether as a result of allegations, denied by him, that he ‘spanked and groped a Pilates trainer’ in Tucson, Arizona, or through the collapse of his Arcadia retail empire, which includes Topshop and Burton, even if that were to involve thousands of job losses and hundreds of empty shops. So there were mixed reactions to the news that Arcadia has succeeded, after months of hardball negotiation, in signing a Company Voluntary Arrangement (CVA) with a required majority of its creditors, including its major commercial landlords, that will cut its cost base by securing rent cuts on 200 stores and enabling it to close 23 others. As part of the deal, Green’s Monaco-resident wife Tina will inject £50 million, so long as there’s no legal challenge to the CVA, and landlords will receive a 20 per cent equity interest in any sale of the group.
However rebarbative Green may be as a personality — I’ve given up trying to play devil’s advocate and defend him — that’s clearly a better outcome than the devastated–high-street alternative. Arcadia’s settlement will encourage many other retailers (Monsoon is next in the queue) as well as restaurant chains to do likewise. But are CVAs a good thing — or are they a way of dodging contractual obligations, including those to employees, while shifting risk from ill-managed businesses to their creditors, the smallest of whom will feel the most pain? A CVA is, after all, a corporate cousin of the Individual Voluntary Arrangement which gained such a bad reputation in the 1990s when it was widely used for wriggling out of personal debts.
Insolvency practitioners tell us the CVA device allows a business to fight another day while its creditors at least have the consolation that their customer is still alive. But a flood tide of CVAs will surely lead to allegations of misuse, many users will go bust anyway, and ‘the CVA scandal’ when it happens will be blamed by most of the media on — guess who? — Sir Philip Green.
Not fracking
As tensions rise in the Strait of Hormuz, anyone concerned about energy security should be glad to know what may be the UK’s largest onshore hydrocarbon discovery since 1973 has been announced in East Yorkshire. The company involved, Canadian–owned Rathlin Energy, believes it is sitting on at least 189 billion cubic feet of gas, equivalent to 31 million barrels of oil, and perhaps much more in deeper strata; and since the drilling site is readily accessible and close to existing pipelines, the find (if confirmed) is much more exciting for investors than an equivalent offshore oil strike.
East Riding Council has so far — bravely — approved Rathlin’s test drilling applications, despite ‘lock-ons’,‘glue-ons’ and other radical gestures by protestors whose banners urge us to ‘unite against fracking’. More permissions will be required and protests will no doubt become more extreme. But a point of interest is that this project involves conventional vertical drilling to a depth of around 2,000 metres, not fracking and horizontal drilling to release shale gas that lurks beneath: the company has said that ‘the deeper (3,000 metres) shale layers play no part in Rathlin’s programme of works’.
Green campaigners — whether or not they get their facts right — oppose all new carbon exploitation, but the fact is that even on the most optimistic view of non-carbon alternatives we’ll need gas for at least one more generation, and if the choice is between shipping it in from the world’s trouble spots or extracting it, relatively painlessly, from our own terrain, it would be irresponsible, not to say crazy, of ministers and local councillors to give way to the emotion of crowds.
Held to ransom
There’s an echo of former days in the court case being brought by Credit Suisse against HMRC in the hope of recovering £239 million it paid under Labour chancellor Alistair Darling’s ‘bank payroll tax’. This was a 50 per cent levy on City bonuses above £25,000, non-deductible against corporation tax, that applied from December 2009 to April 2010 — and Credit Suisse claims it was unfair to banks that happened to lavish cash on their staff during that narrow time period. What’s eye-catching is that Darling expected his populist one-off sting to bring in a total of £550 million, but it actually yielded £3.4 billion. At a moment when banks were under fierce scrutiny, having let their shareholders down and being in urgent need of retained profit to rebuild capital, they might easily have deferred or scrapped one bonus round to dodge the temporary levy. Instead they paid out £7 billion or so, on tax terms punitive to themselves, to hold star performers in place. There could hardly be a clearer illustration of a sector held ruthlessly to ransom by its own executives.
Money for butter
To expect le beurre et l’argent du beurre (the butter and the money for the butter) is the French equivalent of having your cake and eating it. Continuing enquiries into the £94 million black hole at Patisserie Valerie will reveal whether someone was doing just that in the finance department of the cake-shop chain that fell into administration last year. But it’s good to know new owner Causeway Capital is restoring the butter content — which had been replaced by margarine as a cost-cutting measure — of the puff pastry in the surviving 96 outlets.
And it’s interesting to reflect on butter’s role in corporate drama. It was, for example, the making of the princely Irish tycoon Tony O’Reilly, whose first success was the launch of Kerrygold. It also played a part in a famous takeover battle of a generation ago, in which Savoy Hotels held off the predatory caterer Lord Forte by accusing him of the vulgarity of portion control: Savoy tradition must be maintained, declared chairman Sir Anthony Tuke, ‘down to the amount of butter you are given at breakfast’.
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