Likewise, Asda wasn’t getting any pulses racing for its quality or innovation but occupied a space at the lower end of the market. Without the burden of debt, these companies would be operating quite happily, serving their customers, and paying their employees and suppliers as normal.
It would be grossly unfair for these stakeholders to be forced to pay for financial engineering that they had no role in creating.
In the worst-case scenario, companies are financially squeezed, employees are worked to death, and quality is left to suffer until chains enter a slow death spiral from which it will be impossible to escape. This should not be allowed.
But the only way to avoid this may be for debt holders to write off debts voluntarily. Alternatively, they could offer to swap their debt for equity, accepting that it will not pay dividends for several years, but at least they will have an asset that has some value and can participate in the future growth of the company.
It is true that they will lose some money, and will not get a bonus. But that’s life. They took a risk, and it didn’t pay off.
If the City cannot get this done as quietly as it should, the government may have to step in, insist on debt restructuring, and that bondholders, banks and, most important of all, private equity firms take a hit to their debts. .
There will be outcries, of course, and lots of complaints about how owners’ rights are being ignored. No one should listen to them. It’s not as if the likes of TDR and Clayton Dubilier & Rice have been careful stewards of these companies for generations. Nor the Isa brothers.
The harsh reality is that they are get-rich-quick traders who messed up their market timing, got their calculations wrong and are now facing the consequences of those decisions.
There is no reason for the businesses they bought to suffer – and the city has a clear duty to make sure that doesn’t happen.