As 11,000 BHS workers anxiously wait to learn about their future job prospects and pension expectations, any supplier with bad debt protection in place will be wiping their brow.
This blog has long banged on about the false sense of security a bluish hue can sometimes give to a chip. But just when you thought the worst might be over BHS provides a reality check as it plunges into administration.
Those poor workers aside, any unsecured suppliers in the chain will be sweating just a little as they ponder on how much in the pound they’ll get and what will happen to their bottom line.
And there are bound to be a few, flattered by the opportunity to supply an 88 year old high street stalwart with 171 stores nationwide. Like Woolworths before it, although considered a little dowdy and in need of a revamp and better online presence, it was still expected to be there next Christmas.
Et in Arcadia ego
Now, with the benefit of hindsight, even a novice in the credit game would laugh at the idea of shipping thousands of pounds worth of stock to a company that was considered by its former owner to be only worth a quid a year ago.
What’s more, if a man with a long retail track record and reputation for success on the high street can’t make it work what chance an ex racing driver, a lawyer to the stars and a small cap broker?
The man who paid that pound, and we’re talking about a man who knows a thing or two about the wrong side of insolvency , has since thrown his hat into the ring as a possible cherry picking purchaser now that the rather nasty looking £571 million pension hole looks to be heading in the direction of the taxpayer.
Credit where credit’s due
You couldn’t make it up but if anything the demise of BHS is a timely reminder to SME’s that they should look very closely at what they might initially think of as a safe bet. Unorthodox deals are clearly unorthodox for reasons known only to the few involved. However, when former national treasures of the UK’s business and industry are sold for a song alarm bells should ring; remember the hefty return a £10 investment made for the Phoenix Four before MG Rover went to the scrapyard.
It’s often not easy for SME’s to get really up to date figures and performance data or to be party to City opinion on a large corporate. Those whose job it is to insure credit risk can and do so it’s worth weighing up the cost versus the possible disaster a high profile failure might bring.
As for SME’s supplying BHS, those with bad debt protection in place will be sleeping a little easier knowing that they will get paid. Of course those with bad debt protection linked to an invoice finance facility will have already been paid – weeks ago!