BHS’s creditors have been caught between a rock and a hard place

Outlook

The graveyard of failed retailers won’t be needing a space for BHS just yet.

Creditors have approved a company voluntary agreement that secures the short-term future of 8,500 staff, 1,500 contractors and 164 stores. Some of the owners of buildings that house those stores have had to assume the position to get that done: they’ve been told BHS needs to reduce its rent bill, in some cases by as much as 75 per cent.

Worse still, the chain’s pension scheme has created a massive headache for the Pension Protection Fund, which steps in to ensure that members of private final-salary pension schemes get paid most of what they are due when their employers hit trouble.

But here’s the thing: all the creditors were caught between a rock and a hard place. It was effectively a case of no CVA, no business, no rent, no chance of any deals and the owners walk away. No wonder creditors opted for the CVA (although the PPF abstained).

BHS is weak. It still needs to finalise a £100m re-financing package for a promised turnaround plan. There is a strategy (purposeful mums) but history is not on its side. That graveyard? It’s littered with headstones lamenting the passing of myriad high-street stalwarts.

But the bargaining position of BHS’s owners is extraordinarily strong. It’s not as if the landlords have alternative tenants queuing up; and with the CVA signed, it does at least mean some 10,000 staff will keep picking up pay cheques, at least in the short term. These include the management, which is why it isn’t only the PPF that might have had a sour taste in it mouth.

Directors at Retail Acquisitions, which bought BHS from Philip Green for £1, have in place generous service agreements. We don’t know what those fees amount to, but we do know that Retail Acquisitions took out £8.4m in loans from BHS companies for “professional fees” and that a third went to the directors.

While some of those loans have been paid back, those directors, whose taps are still on, have an awful lot to prove right now.

It’s not just who caused the flash crash – but how?

It’s the battle of the “flash crash” and round one goes to the US. A UK court has ruled Navinder Sarao, who has been accused of causing it with the help of a computer he used to trade futures from his parents home near Heathrow, can be extradited.

There will be an appeal, and no wonder. Mr Sarao faces 22 separate charges and could face one of those American prison sentences that in a worst case scenario might worry even Methuselah: The maximum sentence amounts to 380 years.

Talk about overkill. Talk about over-reach. I make no pronouncement on Mr Sarao’s guilt or innocence as regards the charges he faces, which include allegations that he was involved in “spoofing”, a disruptive trading activity designed to manipulate markets.

That’s something anyone can have a go at, if they have a computer, the right sort of brain and nefarious intent.

Whether anyone, including Mr Sarao, could have, through doing that, caused $1trn to be knocked off the value of shares prices? That’s open to debate – and it is still being debated.

If he actually did do that, and I was a regulator, I’d want to know how. I’d want full disclosure so I could be sure systems were in place to stop it happening again.

Perhaps that’s what the US hopes to achieve here: frightening the life out of Mr Sarao, before offering a plea bargain in return for full disclosure.

The problem is that in so doing it has made him a cause célèbre, and potentially a martyr, to all those disturbed at the ease with which the US can extradite UK citizens. Even if he was involved in spoofing, or other dubious trading activities (he denies he was), he probably didn’t cause the flash crash anyway.

Don’t bet on the demise of William Hill just yet

There are two sides to William Hill’s profit warning. The first is Cheltenham, plus football results, and that should come as no surprise to the market. Half the City spent at least part of the week in the Cotswolds, the other half watched the action on their screens. Many of them will have invested in Irish trainer Willie Mullins, who is rapidly becoming the bookies’ kryptonite.

So they will have been expecting the first part of Hill’s profit warning. They’ll be expecting to see evidence of Mr Mullins’s work in the results of peers, too.

The industry will make a song and dance about it. But when punters feel they’re winning, they bet more. Those losses will come back. Of more interest, however, is the bookies’ saying that self-imposed exclusions or betting limits are having a real impact on online profits, clipping them by £20 to £25m a year. Those losses might be permanent. But this too represents a PR win, and a business win – at least in the longer term. Hill’s can, and will, point to these figures as evidence to show that efforts to encourage responsible gambling are working. That the health warnings at the end of gambling ads are having an impact.

Hill’s still faces formidable challenges: It is operating under the same burdens of increased tax and regulation that its rivals are carrying, but while they’ve been busily doing deals in the face of those burdens, Hill’s has been left on the shelf. At least for now.

How it resolves this strategic conundrum looks like a bigger issue than this profit alert.