BHS heading for administration as rescue deal fails

[grober]

Dominic Chappell, the serial bankrupt who bought BHS for £1, has been arrested in relation to an unpaid tax bill of about £500,000. He was arrested on 2 November by HM Revenue and Customs.
Now that came as a complete surprise!
Former BHS owner Chappell arrested for 'unpaid tax bill' - BBC News

 

[Deleted member 37751]

I never met Philip Green in person (though I did see him in public) and judging from how he comes across on TV I probably wouldn't want him as a dinner guest either.

But I am surprised at the hate campaign against him which singles him out for no obvious reason.

Please tell me you're being tongue-in-cheek with that last sentence.

Whenever someone like him gets caught destroying other people's lives through sheer greed then their apologisers say "ooh, that's just capitalism" as though by stealing money out of the common mans pocket has anything to do with enterprise! The man is a thief, pure and simple, he's little more than a sock-less cat burglar wearing a Rolex.

I own businesses and everything I've ever earnt has been done with a clear conscience and I've never felt the need to rip anyone off and people like Green give us all a bad name.

 

[Deleted member 6183]

Empty vessels make the most noise.

 

[PXW]

Haven't read the whole thread so others may have said this already, in which case apologies. My reading is that this is very different from the Maxwell case. There is a huge pension deficit but I don't think there is any intimation that money has been moved out of the pension fund (unlike Maxwell).

In common with many funds, part of the issue is one of valuation. I believe funds are often required to value themselves based on a discount rate that is pegged to government gilts of some sort or other. These are at really low levels at the moment which is pushing lots of funds into a technical deficit - a deficit which would presumably disappear if interest rates were to rise a little. I would be interested if we have any actuaries on the forum who could comment, but so as far as I understand it, the valuation might bear little relationship to the ability of the fund to generate income and meet its obligations, but can still show a significant deficit on an actuarial basis?

 

[grober]

What can I say - ask the Pensions Regulator if there has been any wrong doing in the BHS case?
BHS: TPR launches enforcement action | The Pensions Regulator

 

[renault12ts]

Haven't read the whole thread so others may have said this already, in which case apologies. My reading is that this is very different from the Maxwell case. There is a huge pension deficit but I don't think there is any intimation that money has been moved out of the pension fund (unlike Maxwell).

In common with many funds, part of the issue is one of valuation. I believe funds are often required to value themselves based on a discount rate that is pegged to government gilts of some sort or other. These are at really low levels at the moment which is pushing lots of funds into a technical deficit - a deficit which would presumably disappear if interest rates were to rise a little. I would be interested if we have any actuaries on the forum who could comment, but so as far as I understand it, the valuation might bear little relationship to the ability of the fund to generate income and meet its obligations, but can still show a significant deficit on an actuarial basis?

In good times when pension valuations were higher the same companies in trouble now took contribution holidays...so money was not being put away. You could argue this was the correct thing to do...but history has shown that good times are but fleeting and that such holidays are at best short sighted...at worst downright theft by neglect.

 

[markjay]

What can I say - ask the Pensions Regulator if there has been any wrong doing in the BHS case?
BHS: TPR launches enforcement action | The Pensions Regulator

This is indeed an issue for the Pensions Regulator. How come tens of millions went missing and (so far) no one has been suspected or accused of having committed any offence? Makes you worry about every single work pension out there.

But a 'Pensions Regulator investigation' is just not not sexy... images of a very irate Philip Green putting his hand out to block the camera and trying to avoid reporters while boarding his yacht are far more likely to attract the Daily Mail readers.

I will say this again - I have no idea if Philip Green committed any offence or not, and I have no issue with him going to prison if convicted. I just think that the way the media (and some MPs) are dealing with this issue is simply wrong. Even if he is a rich arrogant barstewart.

 

[Red C220]

Haven't read the whole thread so others may have said this already, in which case apologies. My reading is that this is very different from the Maxwell case. There is a huge pension deficit but I don't think there is any intimation that money has been moved out of the pension fund (unlike Maxwell).

In common with many funds, part of the issue is one of valuation. I believe funds are often required to value themselves based on a discount rate that is pegged to government gilts of some sort or other. These are at really low levels at the moment which is pushing lots of funds into a technical deficit - a deficit which would presumably disappear if interest rates were to rise a little. I would be interested if we have any actuaries on the forum who could comment, but so as far as I understand it, the valuation might bear little relationship to the ability of the fund to generate income and meet its obligations, but can still show a significant deficit on an actuarial basis?

^ Sure, but why let fact get in the way of a juicy story, people aren't interested in unwise business decisions. They want a bit of fat cat fraud uncovered, even if there wasn't any to uncover.

 

[Scott_F]

^ Sure, but why let fact get in the way of a juicy story, people aren't interested in unwise business decisions. They want a bit of fat cat fraud uncovered, even if there wasn't any to uncover.

I'm not aware of any fraud allegations directed at Green or any suggestion that he is liable for arrest since his actions are probably not criminal.

However, they are extremely unethical and have impacted thousands of (mostly lowly-paid) people. He should therefore be vilified and subject to intense pressure to make good his wrongdoings and until then let the juicy stories roll....

 

[Dryce]

In good times when pension valuations were higher the same companies in trouble now took contribution holidays...so money was not being put away. You could argue this was the correct thing to do...but history has shown that good times are but fleeting and that such holidays are at best short sighted...at worst downright theft by neglect.

One of the my early employers took a payment holiday back in the 80s - staff in the scheme got the holiday too - so both sides were happy ..... at the time.

There were, I feel, fundamental problems with the final salary systems anyway. They were a blank cheque of sorts. So somebody who worked at a very low level in an organisation - then late on in their career increased their qualifications and salary significantly could see the pension value of their early year low contributions multiply - with the pension scheme having to cover this new liability.

Whatever valuation scheme you use is completely screwed by this open ended commitment.

 

[Red C220]

I'm not aware of any fraud allegations directed at Green or any suggestion that he is liable for arrest since his actions are probably not criminal.

However, they are extremely unethical and have impacted thousands of (mostly lowly-paid) people. He should therefore be vilified and subject to intense pressure to make good his wrongdoings and until then let the juicy stories roll....

Show me a completely ethical billionaire.

He's done nothing illegal yet the media coverage is representing (by suggestion/association) to the mass uneducated that he (or his company or his wife) actually drew money from a pot designed to pay pensions when nothing of the sort took place.

Public vilification seems to be the new judge and jury these days.

Why not just transfer the entire case to Judge Rinder then we can all watch it with a cup of tea in the afternoon, it would be no more absurd than the media circus surrounding this case to date.

 

[John Jones Jr]

Public vilification seems to be the new judge and jury these days.

Vilification not required.

BHS: TPR launches enforcement action. :bannana:

 

[Dryce]

Show me a completely ethical billionaire.

I've met very few people at any socioeconomic level who are completely ethical.

He's done nothing illegal yet the media coverage is representing (by suggestion/association) to the mass uneducated that he (or his company or his wife) actually drew money from a pot designed to pay pensions when nothing of the sort took place.

Well there is the isue of competence leading up to things - which is extracting a lot of money from a business and structuring things in your favour.

If the business was successful then they could justify it.

If the business went under and they mitigated some of the liabilities to others then people might be disapproving but not as angry.

But when you extract a huge amount of money and then structure your exit through a rather obviously dubious transaction to detach yourself from it - and the result is a liability and loss to others?

Then I think people can be perhaps allowed to judge harshly.

 

[grober]

According to this link the pension funds were moving into deficit before the financial crash in the late 2000's.
By contrast, the Green family received £307 million in dividends from BHS between 2002 and 2004.
How BHS pension fund collapsed while Sir Philip Green made £307 million - Business Insider

 

[Scott_F]

Show me a completely ethical billionaire.

He's done nothing illegal yet the media coverage is representing (by suggestion/association) to the mass uneducated that he (or his company or his wife) actually drew money from a pot designed to pay pensions when nothing of the sort took place.

Public vilification seems to be the new judge and jury these days.

Why not just transfer the entire case to Judge Rinder then we can all watch it with a cup of tea in the afternoon, it would be no more absurd than the media circus surrounding this case to date.

Green has a skin thicker than a rhinoceros and although media pressure and vilification may ultimately prove to be insufficient it is the best tactic available to try to persuade him to do the right thing.

And it's fun to watch his angry little man outbursts.

 

[st13phil]

There were, I feel, fundamental problems with the final salary systems anyway. They were a blank cheque of sorts. So somebody who worked at a very low level in an organisation - then late on in their career increased their qualifications and salary significantly could see the pension value of their early year low contributions multiply - with the pension scheme having to cover this new liability.

Whatever valuation scheme you use is completely screwed by this open ended commitment.

It wasn't really the open-ended commitment as you describe that was the problem, it was that pretty much every employer who ran a final salary scheme shed lots of labour on very generous early retirement pension terms all through the 1990's and into the early 2000's. This had a catastrophic effect on scheme funding in that it absorbed any "surplus" that was left after the contribution holiday had reduced inflows for a number of years.

Basically, instead of funding the early retirement pensions at the time of shedding labour, employers dumped the liability on the pension scheme to be picked up by the remaining contributors many years later. And now - totally predictably - the wheel's come off.

 

[grober]

I have yet to hear a legitimate reason why you would sell a business you paid £200 million for ---to a company headed by a serial bankrupt for £1, when presumably the realty alone was worth considerably more even taking into account the downturn in city centre retail property. Indeed it was possibly this downturn that ultimately did for Retail Acquisitions
What went wrong with BHS's mega property portfolio? | London Evening Standard

 

[markjay]

According to this link the pension funds were moving into deficit before the financial crash in the late 2000's.
By contrast, the Green family received £307 million in dividends from BHS between 2002 and 2004.
How BHS pension fund collapsed while Sir Philip Green made £307 million - Business Insider

Is there a reason why shareholders should not receive dividends from a company whose pension fund is in deficit?

If the pension fund deficit is not the fault of the shareholders, but presumably that of the fund's administrators and trustees, then why should shareholders be expected to foot the bill for other people's mistakes?

If BHS was a public company, would there be any grounds for directors to issue a cash call to shareholders to shore-up the company's pension fund?

Personally I don't like Philip Green one bit - I just don't allow my personal dislike of the man to cloud my judgment of his actions.

 

[grober]

Sir Philip Green: 'Still stains' despite BHS pension deal - BBC News

Under threat of prosecution from the pensions regulator Sir Philip Green has struck a deal. A victory of sorts.

 

[markjay]

Sir Philip Green: 'Still stains' despite BHS pension deal - BBC News

Under threat of prosecution from the pensions regulator Sir Philip Green has struck a deal. A victory of sorts.

So PG avoids prosecution (and possibly gets to keep his knighthood although that wasn't officially said?).

The Pension Protection Fund gets to keep its cash as it now won't have to pay BHS employees' pensions.

And the employees no longer stand to lose 10% of their pension, as they will now get their full pensions as opposed to getting just 90% of it which is where they were before the deal was struck.

So everyone wins?

Not quite. PG is making a voluntary payment. That does resolve the immediate issue but does not help fix a broken system. What if the owner of the next business that goes under with an empty pension pot does not want to make a voluntary payment (and perhaps does not have a kingwood he wishes to preserve...)? There is no answer to that.