BHS faces crucial vote on its future
It is crunch time for one of the UK's best-known High Street names, the troubled department store, British Home Stores (BHS). Its creditors will vote on Wednesday on a deal it desperately needs to cut the rent bill for its 164 UK stores.
The loss-making retailer currently has debts of over £1.3bn, including a pensions deficit of £571m. BHS was bought by billionaire Sir Philip Green for £200m in 2000, but he sold it last year for just £1. It is now owned by Retail Acquisitions, a consortium of financiers, lawyers and accountants.
BHS - which has been loss-making for seven years - wants its creditors to agree to a Company Voluntary Arrangement (CVA). In effect, this is a compromise financial deal which depends on them accepting reduced rents. Otherwise BHS is likely to end up in administration, placing the jobs of its 10,000 workers at risk.
BHS says a deal to cut its rental costs is vital in order to turn around the loss-making business. "Although a difficult process to go through, this sets in motion the comprehensive updated turnaround plan," says its chief executive, Darren Topp.
The retailer has divided its stores into three groups - depending on their profitability. For 77 stores the rents it pays will remain unchanged, while for 47 stores BHS is "seeking a reduction in rent to market levels".
Its least-profitable 40 stores will continue to trade for a minimum period of 10 months while talks go ahead "to reduce rents substantially", says the retailer. At Wednesday's meeting BHS needs 50% of its landlords and 75% of its creditors to agree to the deal.
However, Julie Palmer, retail analyst at insolvency experts Begbies Traynor, says BHS is confident it will get an agreement. "It is passing the buck essentially to the landlords - with promise of a reduced but continued rental income for the next 10 months." Mr Topp said a deal would give BHS "a secure financial footing from which to grow and deliver sustainable profitability". BHS is also in talks to address its pension deficits with the Pension Protection Fund, the governmentsupported rescue agency, as well as the Pensions Regulator and the BHS pension trustees.
BHS insists that it continues to meet its pension payment obligations. But in BHS's CVA submission, the retailer's directors are clearly hoping that the two pension schemes will be transferred into the PPF and that the company would have no further liability to fund it. Yet even if landlords agree a deal, BHS warns that it needs extra funding to trade beyond 25 March and it is trying to raise £100m.
Charter-Time Warner Cable merger won't actually kill cable companies. As federal authorities prepare to approve a deal, it could reinvent cable providers. For decades, there was practically no regulation of cable TV service. This had left consumers at the mercy of cable providers. For many years, the cable company was the only provider of video at home, in most parts of the country. Video was sent via a cable box belonging to the cable company and running a program's guide interface reminiscent of 1970's-era computers, not only predating Windows, but also predating DOS 1.0. The setup in cable TV has been very much like the pre-1981 MA Bell monopoly: The company owns the appliance (box, telephone) and you have to rent it. You can only buy channels in bundles. Even if you watch only five channels, you have to buy bundles of over 100 channels to cover the five you want, and you must pay for all of them.
However, in the last couple of years, radical change has arrived to the video-at-home market. The emergence of inexpensive "smart" TVs allowed for new streaming video companies such as Netflix NFLX -1.25% , Hulu, and Amazon AMZN 1.18% to reach home consumers bypassing the cable company. For those TVs that were not-sosmart, add-on hardware such as Roku, Apple AAPL 0.70% TV, and Amazon Fire TV ensured that the streamers had access to the TV, again bypassing the cable box. With cable service prices and cable boxes' rental fees skyrocketing, hundreds of thousands of cable customers have cut the cable cord.
In this environment, The Wall Street Journal reportedthat Federal Communications Commission Chairman Tom Wheeler is preparing to circulate a draft order to approve Charter Communications' deal to buy Time Warner Cable-a merger that could very well opencompetition for cable TV boxes. Such regulations level the playing field of competition between the cable company and the streaming services. The big beneficiaries are the consumers who will end up paying only for what they watch, and paying much less. Expect millions to cut the cable cord. And innovation will finally reach the cable TV world. With 40 years' delay, we might see a TV programming guide with a graphical interface and 21st-century search capabilities.
As traditional monopolists, cable companies will fight tooth and nail to prevent this change that will cut significantly into their revenues. But is this the demise of cable TV companies? Not at all.