So it is farewell to Oddbins – at least under the present ownership. The failure to gain agreement from HMRC to the Company Voluntary Agreement (CVA) proposal means the retailer will fall into administration at a court hearing on Monday. But it could rise from the ashes within a week.
Creditors at yesterday’s meeting to consider the CVA option, which Oddbins and its advisers, Deloitte, suggested could return 21 pence in the pound over 46 months, were bemused by HMRC’s intransigence.
Lee Manning of Deloitte, who is now likely to be the administrator, told the meeting that negotiations with the Revenue had been continuing for 10 days and it was only at 4pm on the eve of the meeting that HMRC announced that it would reject the plan. It even refused a request to allow the CVA meeting to be adjourned to allow time for further negotiations.
To gain approval, 75% of creditors would have had to accept the CVA plan and Manning told creditors that, apart from the Revenue, 84% would have done so. However, HMRC’s decision meant that 68% of creditors opposed the plan.
Why, asked other creditors, had HMRC pulled the plug at the last minute? Surely it had given outline consent to the plan and thus to the meeting being called – if it had always opposed the CVA there was no point in holding one.
Manning said it was his impression that HMRC felt that Oddbins would have been undercapitalised in its new, slimmed down guise despite an unnamed investor being willing to inject £1.25 million into the company once the CVA had been approved. So HMRC, which is owed more than £8m in the £20m Oddbins collapse, vetoed the scheme.
What happens now? Creditors at yesterday’s meeting were pessimistic about getting much, or any, of their money back. As one put it: “That’s £10m taken out of the wine trade”.
Seeking to assuage initial suspicions, Manning said: “There is no planned ‘pre-pack’ waiting in the wings.” But he said that there were up to three separate trade and financial groups who were potentially interested in taking over Oddbins from the eventual administrator and that it might be sold “within a week or so”.
“We can rescue the business but not the company,” he said. Creditors might get between 5p and 7p in the pound as a result, but many at the meeting thought that optimistic. Oddbins, he said, had effectively been restructured in line with the CVA plan and thus it could be sold “as a going concern”. There was £3m of stock in the business “so it can trade”. That caused some creditors to wonder on what basis that valuation had been calculated.
Manning also sought to assure suppliers that once the administrator had been appointed, payment for subsequent orders would be assured. Simon Baile, the present Oddbins managing director, said: “No orders are leaving until paid for”.
A number of suppliers wondered who might now be willing to trade with a rescued Oddbins, no matter the stability of any new owner. While Manning suggested that a trade buyer might achieve economies of scale by bolting the Oddbins trading name onto an existing franchise, others speculated that overseas groups in particular might not be able to obtain credit insurance for trading with Oddbins; others wondered how many of the retail leases could be transferred to a new owner.
Virtually all at the meeting were saddened to see Oddbins fail; everyone noted the depressing pattern of independent national chains being squeezed out of business. “First Unwins, then First Quench, now Oddbins,” mused one. A contraction of independent outlets meant it would be that much more difficult to replace volumes.
Does such a business model work in competition with the supermarkets one the one hand and the niche suppliers such as Majestic and franchised wine clubs on the other? Baile said that the company had been growing its sales during 2010 but that the “squeeze on working capital” meant that pattern could not be maintained.
Creditors left with several questions still in their minds. First, what is the true relationship between Oddbins and Castel, which Manning said was the “largest creditor” apart from HMRC? They wonder whether the administrator will continue with Oddbins’ court action against the French group. Manning was non-committal.
Others said they were unclear as to why Ex-Cellar Investments, a company controlled by Oddbins’ directors, and Oddbins Properties Ltd, together owed Oddbins more than £17m. “There’s something I don’t understand here – it’s not been fully explained,” said a major trade creditor. “Let’s hope the administrator, who is supposed to act in our best interests, is able to sort it out.”
Meanwhile, spare a thought for the hundreds of Oddbins employees being made redundant. They are likely to get the statutory minimum payment and face difficulties in finding new jobs at a time when unemployment is rising sharply.
Finance on Friday, 01.04.2011