Money Portal had debts of £55m; Honister deal avoided 'Armageddon'

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by Maryrose Fison on Jun 24, 2009 at 14:56

Money Portal had debts of £55m; Honister deal avoided 'Armageddon'

The Money Portal (TMP) was £55 million in debt when it entered a pre-packed administration sale to Honister Capital this week, chief executive Mark Lund has revealed.

This is much higher than the £32 million previously reported by Citywire. This reflects the fact that in addition to a loan from the Bank of Scotland, Money Portal’s largest creditor, the group had also raised money in an issue of preference shares and separately raised money from a City investor.

Lund said the level of debt was unsustainable. 'The total debt was circa £55 million or so which was a major debt burden for any business in the type of economic conditions that we have experienced,' he said.

Lund defended the move to dump liabilities within the Money Portal shell that has been placed in administration. He said it avoided the ‘Armageddon scenario’ of the entire group going under with the loss of 2,000 jobs. He said the FSA had been informed at all times of the bail-out by Peter Simon, founder of high street fashion chain Monsoon Accessorize.

Although the deal to create a debt-free Honister Capital will see three years’ worth of advice liabilities from the Bates business stay behind in TMP and potentially fall on the Financial Services Compensation Scheme when administrator Ernst & Young liquidates the company, Lund said it was a price worth paying.

‘It could have been multiples worse if we had not found an acquirer for these businesses and if the whole of the group had gone into full-blown administration then we would really have been talking about a potentially big bill for the industry. I know that is cold comfort for people but we have achieved a better outcome,’ said Lund.

However, there is uncertainty over who will pick up the tab for the liabilities from GP Noble Trustees, which is the subject of a fraud inquiry by the Pensions Regulator and the Serious Fraud Office. Lund said these liabilities remained with TMP and were likely to be higher than those for Bates. A spokesman for the FSCS was unsure where payment for these would ultimately land and told Citywire it would check with a director.

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2 comments so far. Why not have your say?

Surely a case of "Armageddon out of here"

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Realist

Jun 24, 2009 at 17:18

There are are a couple of reasons why businesses fail. They are either badly run, suffer some kind of large supplier or customer failure or weren't viable in the first place. The two in the middle clearly weren't the case for TMP, so you can take your pick from the others. Probably a combination of both, but how can you saddle yourself with that level of debt on such a low margin business and expect it to work?

The liabilities comments are laughable. Liabilities for Sage FS, Burns Anderson and Willis Owen will stay with the respective firms as the share capital was purchased (i.e. they remain the same corporate entity). Liabilities within Bates will be dumped onto FSCS once Bates is declared in default (which won't take long). True, this only relates to only about 3 years of liabilities in terms of the acquired Millfield business afrter the Millfield/Inter-Alliance liablities were dumped onto FSCS as part of that pre-packaged administration deal, but ALL the historical liabilities for the rest of Bates are being dumped as well. GP Noble has ceased trading and its parent is in administration. Who do think is going to pick up the tab? Yep, once its assets have been exhausted it will be the rest of the industry again. When will "poluter pays" become a reality? Not under the FSA's latest financial resources proposals, apparently. Firms should be made to stump up their cap ad in cash, held by a third party with interest accruing to the firm, and add to it (or get some back) every year as the requirements change on sign-off of their accounts. Simple. Isn't it?

"Loss of 2000 jobs" is blatantly untrue. Sage FS, Burns Anderson and Willis Owen could have carried on under new ownership if they were viable and not in breach and almost all the advisers in Bates were self-employed. They needed merely to find new host companies, be it network or national, or go direct.

And where has the FSA been during this whole farce? It signed off on the acquisiton of Burns Anderson around 16 months ago. Asleep at the wheel again? One can only wonder at the content of the financial returns Bates was submitting. FSA - wake up and smell the roses. You're helping to perpetuate the problems you're supposed to be dealing with!

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