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Tuesday 30 December 2014

CityLink - The Questions Keep Coming

The rank stench emanating from the collapse of parcel delivery firm CityLink is not going away any time soon, as news emerges that only underscores the callous disregard of Better Capital and its hypocrite of a boss Jon Moulton, who wants as much austerity as is possible for any Government to dispense, except when it comes to tapping the same Government to make redundancy payments.
Moulton - not convincing anyone

As I’ve previously noted, Better Capital has not written off its £40 million investment in CityLink, which, being in the form of loans, makes it a “secured creditor”. This means it is first in the queue for any funds which are recovered as parts of the business are sold off following its liquidation. Moulton and his merry men expect to get £20 million back, which is impressing all those who will get nothing not at all.

Yes, the sub-contracted van drivers, who haven’t been paid for the work they did this month, will end up with nothing, except the bills for running those liveried vans. And we still don’t know what Better Capital may have taken out of CityLink in the 20 months it owned the business. The Guardian has told thatThe majority of the company’s properties and vans are thought to be leased”, but we still don’t know the detail.

What was owned, rather than leased, when CityLink was sold by former owner Rentokil in April last year for £1, needs to be compared to what is owned, or leased, now. Any properties that were sold and then leased back during Better Capital’s tenure mean assets stripped out of the business. And, for Moulton and his pals, they mean that any sob stories about being out of pocket would be so much bullshit.

What’s more, there won’t be a rescue: “The RMT union has urged the business secretary, Vince Cable, to rescue the company but Moulton said the Department for Business was aware of City Link’s collapse before Christmas and did not request a meeting to discuss its future. It had proved impossible to save City Link, he said, stressing that the company’s directors would have been guilty of a criminal offence had they not filed for insolvency when it became clear ‘a couple of days before Christmas’ that the firm would collapse”.

No surprise that Moulton, who has given to the Tories in the past but is now backing UKIP, blaming the Government, but now look at his next punt: “He estimated the company needed an injection of about £100m to turn it around”. So what was his company doing putting no more than 40% of that amount in last year?

And, as I pointed out previously, CityLink’s only accounts from Better Capital’s tenure, those for last year, show an annual loss of less than £13 million. In the period from April, this would have meant a pro-rata amount of less than £10 million. Are we expected to believe that Better Capital were such lousy bosses that another £30 million was lost this year before anyone realised? Pull the other one.

Someone is not being totally honest about what has happened to CityLink.


rob said...

"Someone is not being totally honest about what has happened to CityLink."

Unfortunately "light touch" regulation introduced by Government has led to a mindset in the City that anything goes. And it usually does when accountants with subtle contracts arranged by lawyers make sure the pie doesn't devolve downwards too far.
Government will shrug and wash its hands on the basis that no laws have been seen to have been contravened and the FCA is toothless having neither the staff nor the inclinination to pursue so many controversial cases some of which they have lost recently in the Courts.
In the final analysis The City is the powerhouse of the nations's economy and no one, certainly not a Tory Government is going to risk throwing the baby out with the bathwater by clamping down heavily on the "illegal/unethical" behaviour there.

keith said...

Worth having a read of the chairman's intro to the Better Capital report http://www.bettercapital.gg/pdf/Better-Capital-PCC-Limited-30-Sept-2014.pdf

which in city terms is surprisingly critical.

Couple of things to keep an eye out for. As far as I can make out City Link is owned by Fund II of Better Capital, which is registered and operated in Guernsey. So the UK taxpayer picks up the tab for a Guernsey fund (wonder what Ukip would say about that).

And while the report mentions City Link problems and the downgrading of the £40m occurring in September 2014, there are several methods of valuation used (so far not audited) decided by the fund management itself.

Anonymous said...

The following statements in some of the press reports are remarkable.

"EY said it would help City Link staff access statutory redundancy payments from the taxpayer, as although the company is liable it is insolvent and unable to pay."

(From http://www.telegraph.co.uk/finance/newsbysector/supportservices/11315205/Administrators-confirm-substantial-redundancies-at-stricken-City-Link.html)

"He also defended criticism that taxpayers would end up paying for City Link staff's redundancy following administrator Ernst & Young's (EY) statement that it would refer employees to the government's statutory redundancy payments scheme."

(From http://www.bbc.co.uk/news/business-30621884)

Statutory redundancy pay is a relatively small amount of money (the maximum is under £ 14,000) that a company is legally obliged to pay someone who is made redundant. If a company is unable to pay statutory redundancy pay when it makes someone redundant, the State will pay it but will seek to claw it back from the company's assets. When a company is unable to pay statutory redundancy pay this normally triggers a great deal of interest in the affairs of the company by various state agencies such as the Insolvency Service. That is because a company shouldn't get itself into a situation where it cannot pay statutory redundancy pay. It is difficult to see how such a company could only have discovered recently that it was in such difficulties.