BC Partners (owner of Foxtons) (Lounged)

[macroban]

I see that BC Partners (owner of Foxtons) are having financial difficulties.

Anecdotal evidence of lack of sales through the East Dulwich branch seems to support this.

Do any forum members who work in "the city" have any further information?

[mikeb]

I presume you're referring to the Guardian article at the weekend? Jon Moulton has a point although I think it could take some time to play out.

Mizuho and Bank of America provided 100% of the debt for BC Partners' acquisition in the expectation that they would be able to bring other banks in (i.e. syndicate) later to share the exposure. However, from news articles in August, it looks like they are struggling to interest other banks due to a combination of (a) the general turbulence in the markets (b) this deal looks particularly highly-leveraged and © the return on the loan now looks inadequate. The banks can attempt to fix © by offering some more money to prospective partner banks but only up to a certain point.

BC Partners probably has a few options - not least of which is to ignore it since it's legally the banks' problem.

However, coming back to Moulton's arguments, Foxtons is unlikely to come a cropper unless it trips a banking covenant. Under its current debt structure, it will not have to repay any of its debt for at least 7 years. It should be relatively protected from higher interest rates. It is also likely that its covenant package is pretty weak. All of this means that even if Foxtons doesn't perform as expected, which I would have thought is quite likely, it is likely to have a grace period before it gets serious.

Of course, if they've really stuffed up their business plans or documentation then it could come tumbling down much quicker e.g. the acquisition of Esporta gyms took only 6 months to go tits up!

 

[macroban]

Thanks, mikeb.

So it's an interest only arrangement for the first seven years and BC Partners only need enough cash flow to pay the interest on ?250m.

[mikeb]

Yes, so far as I can tell at the moment and without any inside information. However, it would not be unusual for interest cover to be tight at the start of a deal, increasing as growth provides additional cashflows. If this growth doesn't appear ...

Also, Mizuho and Bank of America might also be pushing for some more lender-friendly terms to enable them to sell down their debt (even though they might not have the legal right to get these terms from BC Partners). This could lead to the deal structure changing.

Finally, Foxtons is a relatively small deal compared to some that are in a similar position e.g. Boots, AA, Intelsat (where BC Partners paid $5bn for a majority stake).

[macroban]

Although it might seem that Foxtons arrived in East Dulwich on the crest of a slump, mikeb's analysis suggests they will survive.

[macroban]

Financial journalists seem to have settled on ?290m for the price BC Partners paid for the 20 branches of Foxtons. At an average price of ?14.5m per branch commentators are saying that BC Partners overpaid and the Foxtons business model is now likely to collapse given the costs of re-financing the loans used to purchase Foxtons and the slump in the housing market.

Has anyone seen any glum faces in East Dulwich Foxtons recently?

[PeckhamRose]

Oooh mikeb, a man in the know. Where should I invest the hundred or so pounds I am gonna save by not being fleeced for buying ridiculously expensive bread (see other topic!)

I am walking past Foxtons later, I shall look in and smile at the staff and get a free cuppa out of them maybe as I pretend to be interested in ?300,000 ex council flats....!

[SteveT]

Macroban wrote: crest of a slump

I like the terminology, made me snigger.

So if Foxtons faulters what a great loss to the community.

Now all sing together............There's no business, like no business, there's no business you know...........

[macroban]

Another "commentator" says BC Partners paid ?390m, but what's ?100m between private equity friends?

[mikeb]

I've seen ?390m as well, from Reuters. Total acquisition debt package was ?260m

According to the Telegraph today, Countrywide estate agents (Bairstow Eve, John D Wood, Mann Group) seems to be having some difficulties. Its financing structure is broadly similar to Foxtons, although probably has even fewer restrictions. So if the article is right, this could suggest that Foxtons could also be facing problems sooner rather than later.

[macroban]

Last year Foxtons' net profit before tax was ?25m.

60 staff "left" Foxtons in February 2008.

Foxtons' management say completed transactions are 20%-30% down (in number) this year.

Is Foxtons' still solvent?

[Alan Feedlebra]

I am crossing my fingers that their temple to mammon will leave ED shortly. And take their little cars with them.

[grandpafred]

Do I second that!!! Especially the thought of seeing the last of those little B----y cars!!!

[macroban]

Debt of British real estate agency Foxtons, which now faces a fall in UK home sales, was offered at about 80 pence per pound about two months ago

[????]

I will be doing the cut throat gesture even more as I pass by the Fishtank*

*polite version of someone's far ruder and better description

[macroban]

Well, they did ride into East Dulwich on the crest of a slump.

[karter]

Boards everywhere, can't see them closing down.

[ASR]

Did anyone read the article about Foxtons and its founder in the FT this weekend? It pretty much explains the whole situation with the company at the minute, and also the hefty sum which jon hunt (founder) made upon selling the company last year to BC partners. Even though foxtons financial situation is other than stable, i very much doubt they will be closing down soon - despite them arriving in ED during uncertain economic times, they are very well established and are leaders in their market although only operating in London and the South West.

[macroban]

The Financial Times does Foxtons in detail.

The company is now "worthless".

[MrBen]

Good article in the FT Weekend - made interesting reading. I think one fact sums it up - that Foxtons annual interest payments on the BC partners loans are more than their 2006 profit (which was a good year). And they only have 8 years to pay it back. In a falling market. And they have no real assets other than the odd freehold, commercial leases on their 21 hideous branches. And 79 green mini coopers. Their founders sell out last summer was so perfectly timed, it makes me feel queasy.

B**%%&!

[lozzyloz]

Tenuously related. Thought this was an interesting move by Phoenix against the tide of current opinion. Is this where the smart money is going?

[Zaardvark]

Must say that I think they would probably do better over the next few years by making their agencies into actual coffee shops - see http://news.bbc.co.uk/1/hi/magazine/4826444.stm if you didn't already know how dodgy they are.

Best

Zarrdvark

[AcedOut]

macroban - great article. Thanks for the post. The last few paragraphs made me smile. I'd love to be able to turn down an offer of ?200mm for my house!

[ASR]

Lol. Wouldnt we all? I have walked up that street (Kensington Palace Gardens) loads of times and when you see the houses there and think about it, i am not surprised that he turned it down lol. The houses there are amazing!

[AcedOut]

What a guy though - as much as I can't stand estate agents, he's definitely some entrepreneur.