Section:GDN 1N PaGe:28 Edition Date:190807 Edition:01 Zone: Sent at 6/8/2019 20:48 cYanmaGentaYellowbl
- The Guardian Wednesday 7 August 2019
(^28) Financial
Business view
Nils Pratley
W
hat a useful
phrase –
“current
market
conditions”.
It can be
deployed in almost any situation
with no need to join the dots
between, say, latest tensions in the
US-China trade war and an attempt
to raise $500m (£412m) to help
construct an enormous fertiliser
mine under the North York Moors.
Sirius Minerals, hard at work
already near Whitby, rolled out the
magic words as it pulled its junk
bond off er and promised to return
next month to have another go.
Well, OK, the threats and insults
fl owing between Washington
and Beijing are clearly a broad
worry for all investors. But it’s notobvious why they should move the
dial at Sirius, which is almost the
defi nition of a special situation.
The company’s polyhalite mine
will be the biggest to be dug in the
UK in years and the plans involve
sinking two shafts to a depth of
1,500 metres (4,920ft) and building
a 23-mile (37km) underground
tunnel, complete with conveyor
belt, to a port on Teesside. In any
construction project of that size,
there is a risk of cost over-runs.
It is why the bonds were pitched
with a fat 13.5% coupon, or interest
rate, in the fi rst place. Maybe
marginal buyers will bite in a
month’s time but Sirius shareholders
must pray that’s the case. The
$500m is required to unlock a $2.5bn
credit facility from JP Morgan and
time is running short. Sirius onlyhas enough cash to keeping running
until the end of next month.
Its c hief executive, Chris Fraser,
has done well to get his ambitious
project this far, defying the “you
cannot be Sirius” gags. But the
share price, down 20% yesterday
at 10.4p, has halved since he
unveiled the complicated $3.8bn
four-part fi nancing plan in April.
Shareholders’ worry is obvious:
if someone has to dig deeper to
replace the junk bonds, it will
probably be them.Boohoo for jobs
Few people would regard Karen
Millen and Coast as big online
brands. Both , until now, spoke
the language of fl agship stores,
boutiques and concessions. Direct
online sales comprised only about
15% of combined revenues in the
last fi nancial year. But Boohoo’s
management isn’t bothered. It is
buying the online operations and
intellectual property rights for
£18.2m , and will leave behind all 209
physical outlets.
This outcome is likely to be
appalling for the staff – 1,100 jobs are
at risk – but the clinical transaction
shows the state of the fashion
world. If revenues have stagnated,
stores and leases are a permanent
headache. But, once those fi xed
costs are removed, a second life for
the brands is possible.There’s no guarantee that
reincarnation will be achieved but,
for Boohoo, it’s a low-risk punt :
£18m is peanuts for a company that
is now worth a remarkable £2.7bn.
In terms of market positioning,
Karen Millen and Coast are miles
away from Boohoo’s fast fashion.
But that, presumably, is the
point. Once the teenagers and
twentysomethings have been
hooked, they can be sold longer-
lasting clothes as they grow up.
It’s only the joint administrator,
Rob Harding of Deloitte, who needs
to pipe down. Yes, as you say, you’ve
facilitated “the survival of these
iconic British brands”. But the staff
also wanted you to save jobs.Rolling towards no deal
Rolls-Royce says it has spent £100m
preparing for a no-deal Brexit but it
is committed to the UK and expects
to cope. In case any no-deal zealots
are tempted to seize on the positive
half of the assessment by the chief
executive, Warren East , and ignore
the rest, let’s set out his quote:
“I don’t think many people in
Rolls-Royce are going to lose their
jobs as a result of Brexit directly
[but] at a lot of other companies
that’s what people are looking at.”
Quite. Some high-profi le names will
be able to protect themselves. But
that would not be the full picture –
nothing like.Karen Millen and Coast
are miles away from
Boohoo’s fast-fashion
portfolio, including
Nasty Gal. But that,
presumably, is the point▲ The Sirius Minerals test drilling
station on the North York shire moorsSirius shareholders must hope
junk bond buyers will bite soon
- its cash will only last a month
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