HALP

[ewt]

From timeplease and Charlie Stross,

"Finally, can some rich, beer-drinking Belgian entrepreneur please buy Liefmans Breweries, which were unfortunately declared bankrupt last Friday? It's a cash flow glitch, due to bugs in a new bottling line and scheduled duty payments; the brewery should be long-term viable as a business."

Comments

[feanelwa.livejournal.com]

Sorry, I'm 20p short.

[purplecthulhu.livejournal.com]

I can give you 20p!

LOL

[cartesiandaemon.livejournal.com]

I'll chip in the 20p :) That just reminds me of a lovely quote from Slevin, where he's hauled up in front of the boss,

Slevin: Well, because I owe you $96,000, and I may have a slight problem coming up with the money.
The Boss: Oh, okay. Well, why don't we just make it an even 90?
Slevin: I... may have exaggerated the slightness.

[beingjdc.livejournal.com]

If it's a cashflow glitch they should trade through administration. I am, however, suspicious about the number of companies having 'cashflow glitches' at the moment.

Why don't they write to the Bank of England, they seem to have money to throw around on basket case companies who have made idiotic gambles, I'm sure they could spare a bit for someone whose biggest problem is a buggy bottling system.

[pplfichi.livejournal.com]

But surely one obvious thing to consider is that if banks are less willing to lend companies money, companies cannot get a loan to get them through the cashflow glitch like they have been able to under more liberal lending conditions?

[beingjdc.livejournal.com]

Indeed. So a company which is more vulnerable to cashflow glitches is now less viable, overall, than one which is less vulnerable. This company has demonstrated said vulnerability. That might be a one-off, or it might not - it's not beyond the bounds of possibility that we'll see an insolvency (or at least a 'cashflow glitch) in a major pub chain in 2008. That would in turn, I imagine, create an even bigger cashflow glitch for small brewers.

[hairyears.livejournal.com]

An interesting scenario.

See this reply (http://ewtikins.livejournal.com/740716.html?thread=3715436#t3715436) below for the banks' likely response.

[daneel-olivaw.livejournal.com]

I'm with you. Cash flow glitches on long-term viable companies are the sorts of things that bankers love - they get to make interest on fundamentally safe loans. A buggy bottling line sounds like an open-ended issue to me, but one that ought to have been anticipated. I'm left asking "What else is wrong?" - the bottle line sounds like the convenient excuse rather than the reason.

[hairyears.livejournal.com]

Unfortunately, modern-day banking regulations make banks net consumers of liquidity in times of financial stress - or in plain English, they aren't allowed to provide bridging loans when a borrower's biggest customer fails to pay up, or some financial commitment falls due.

Like, for example, needing to roll over an existing loan with that very bank. Or - all too common this month - the bonds the company issued five years ago fall due and they must place a new issue into a frozen market.

These are very common scenarios in a recession, and the 'regulatory capital' rules that allegedly make banks safer act as a dangerous destabilising influence in a recession. Yes, it's 'safe' that that every individual bank is forced to hold reserves, and that there's a cap on the amount of money it can risk - but when default rates rise and companies hit cashflow problems, that's the very moment that credit needs to be available. And the rules say that the risk has risen and you should be cutting back on your exposure.

If you can get hold of todays Financial Times, there's a slew of articles on qualified disclosure - warnings as to whether the 'Going Concern' statement in the accounts might hide a looming refinancing date, or some similar financial resilience issue. It's the same point: could this company survive a cashflow crisis?

[beingjdc.livejournal.com]

Your bonus question would be, as of November 2007, which five major investment banks' holdings in Level 3 mark-to-magic assets were greater than their total equity?

[hairyears.livejournal.com]

What, there were only three?

Seriously, I'm not allowed to answer that.

[beingjdc.livejournal.com]

Am I allowed to? Specifically can I say which one had $88 billion in Level 3, as against an equity base of $35 billion?

[hairyears.livejournal.com]

Ah, but that's in the public domain!

Even so, I can't comment.

[bluedevi.livejournal.com]

Oh noes! Don't take my Kriek away!