Postman Pat and Basil Brush cost HBOS £75m as Entertainment Rights collapses
Chris Tryhorn
The Guardian, Thursday 2 April 2009
Article history
Postman Pat: part of the stable of Entertainment Rights characters. Photograph: BBC
The collapse of the company behind Postman Pat and Basil Brush is believed to have cost HBOS more than £75m.
The bank, which is now part of the part-nationalised Lloyds Banking Group, has had to write off at least half of its loans to the media group Entertainment Rights, banking sources said. Entertainment Rights' debts had swollen to as much as £150m, forcing it to go into administration yesterday and sell all of its assets to a US group.
The company applied to have its shares suspended and is expected to lose its listing on the London stock exchange today.
Entertainment Rights had failed to find a buyer for its whole business and finally called in administrators at Deloitte when it gave up hope of securing a "solvent restructuring". The company's stable of children's characters, which also includes Rupert Bear and He-Man and the Masters of the Universe, have been bought by New York-based Boomerang Media, a company backed by the Chicago-based private equity group GTCR and managed by Eric Ellenbogen and John Engelman. The Americans will now take back ownership of some of their old properties such as Lassie and Casper the Friendly Ghost, which they sold to Entertainment Rights as part of the $210m (£107m at the time) disposal of their previous company, Classic Media, in December 2006, a deal that played a major part in Entertainment Rights' later debt problems.
The value of yesterday's sale was not disclosed, but it is believed to have fallen a long way short of recovering all of Entertainment Rights' debts. The deal has left investors, who had already seen the value of their shares almost wiped out, likely to receive nothing. However, it was good news for the group's 90 employees in London, New York and Nashville, who will transfer to the new company. Entertainment Rights' demise closes a turbulent period in which it issued a series of profit warnings, saw its chief executive leave after just nine months and axed a third of its staff. "The board of Entertainment Rights has explored a broad range of strategic options over the past six months including the possibility of restructuring or refinancing the company's debt, raising new equity and a sale of all or parts of the business," said Nick Edwards, a Deloitte partner and joint administrator. "Despite the financial support of the group's lender through this period, the group has been unable to achieve a solvent restructuring."
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Well, there seems to be quite a groundswell of anger over this shareholder stitch up. The fact that the Classic library of rights was bought in 2006, only to be sold back to them in 2009 for what appears to be less than half the original price, (not that they've released this information),is cause for investigation for starters. The auditors should be brought to task over their valuations, as should the directors at the time, namely Heap, Bransgrove, Hemmings, Smith, Gaines.
ReplyDeleteHow come the bank was so willing to lend such a huge amount of money for this deal? Did they not do their own research as to the value of these rights? My guess is that ER overpaid for the rights and so it's hardly surprising that they are not worth anything like what they paid for them a mere three years later. This Classic Media acquisition was the death of ER. Had they not done this deal, chances are ER would still be in tact today. And that's just for starters.
I think we should all bombard the FSA as this is a utter disgrace. I have lost 10k on this share and I bet the major shareholders knew what was happening and came out smelling of roses.
ReplyDeleteWhat next for what remains of Entertainment Rights?
ReplyDeleteA creditors meeting followed by a CLASS ACTION against the board and its advisors.
All those contingency lawyers looking for their fill of the spoils should get in the queue with the rest of us...... its going to be a big pot
As for Sir Robin Miller (acting Chairman) and Edward Knighton (CFO) - A completely senseless appointment designed to camoflage the total incompetance of the previous board whilst they dumped the company's value.
ReplyDeleteStay away from these two corporate nasties and where they appear next. They too have cost the shareholders the company whilst helping themselves to allegedly substantial undisclosed fees.
I've lost c.£3,600 on this. And normally I'd accept caveat emptor (albeit through gritted teeth). However, this is decidely fishy.
ReplyDeleteOne day the portfolio was worth a fortune (presumably based on projected earnings). And the next day it was only worth half as much. Why? Did the projected earnings fall? (seems unlikely). Or was the valuation dodgy or incompetent? (in which case someone has questions to answer).
And I'd also like to know whether the Directors have actually lost anything.
iv lost £7k in this and i am equally as mad about the stinky deal as you are. I intend to do speak to the press and have a word with the fsa. Will keep you upto date with my findings. Email: horeporter@tiscali.co.uk should you want to contact me.
ReplyDeleteDavid
Hi David, I have unfortunately been a long term holder of this company and was taken in by the constant jam tomorrow promises.
ReplyDeleteI will email you over the weekend.
Angry shareholder
How to Complain > How to complain about misuse of the ‘pre-pack’ administration process (or any other corporate insolvency process)
ReplyDelete--------------------------------------------------------------------------------
What is the ‘pre-pack administration process?
A ‘pre-pack’ (pre-packaged sale) refers to an arrangement under which the sale of all or part of a company’s business or assets is negotiated with a purchaser prior to the appointment of an Insolvency Practitioner as administrator. The sale will be effected by the Insolvency Practitioner shortly after his/her appointment.
Why are ‘pre-packs’ used and what rules do administrators have to follow?
‘Pre-pack’ administrations tend to be used where commercial pressures require urgent action. New rules, (Statement of Insolvency Practice (SIP) number 16) which were introduced on 1 January 2009, require administrators to explain to creditors the background to their appointment and the reasons why they considered that a ‘pre-pack’ sale would be the best outcome for creditors. Administrators will not only have to reveal the name of the purchaser of the business and the price paid, they will also have to provide details of any connection that the purchaser had with the former directors or shareholders and the price paid.
Does SIP 16 mean that there will be more transparency?
Yes - The Insolvency Service has welcomed the greater transparency that the new rules relating to ‘pre-pack’ administrations provides. Creditors will now have better access to information about the new owners of a troubled business providing them with greater clarity about the administration process.
Are ‘pre-packs’ a good thing?
Pre-packs can be a good thing, as in some circumstances they will improve returns to creditors. In addition they can help to preserve the business of the failed company, thereby saving jobs.
How will The Insolvency Service deal with misconduct in ‘pre-pack’ administrations?
We will be working closely with the bodies that regulate administrators to ensure that SIP 16 is put into practice. We will also be looking to use our enforcement powers to clamp down on any directors who misuse the administration process to disadvantage creditors or seek to gain benefit for themselves. We want to hear from any creditors who consider they have been disadvantaged.
Directors of insolvent companies, which includes those going through administration, can be disqualified by the court for a period of between 2 to 15 years if their conduct in the period leading to the insolvency proceedings is considered to be unfit.
How do I complain about a ‘pre-pack’ administration?
If you wish to complain about a ‘pre-pack’ administration or consider that you have been unduly disadvantaged by an administration (or any other corporate insolvency process) please telephone The Insolvency Service hotline on 0845 601 3546, email: enforcement.hotline@insolvency.gsi.gov.uk
or write to:
The Insolvency Service,
Conduct and Complaints Team Hotline,
3rd Floor, Cannon House,
18 Priory Queensway,
Birmingham
B4 6FD.
Here's the link
ReplyDeletehttp://www.insolvency.gov.uk/howtocomplain/complainprepack.htm
I'm as dissappointed as everyone, haven't lost much but still a loss is a loss. I feel stitched up and betrayed by the FSA for allowing this to happen, i will not be putting my money into any future aim stocks it appears to be another way for scoundrels to separate people from there investments. Goodbye UKPLC
ReplyDeleteMark
& another thing...
ReplyDeleteEntertainment Rights chief executive Deborah Dugan said the company was "poised for its next phase of growth" following the sale.
Way to rub your noses in it!!! Thieves
THE FOLLOWING IS AN ARTICLE FROM A SPECIALIST INSOLVENCY PRACTITIONER (note the various bullet points) ……….
ReplyDeleteStatement of Insolvency Practice (SIP) 16
The Insolvency Service has issued a statement saying it will use the new SIP requirements for administrators using this tool. This is called the Statement of Insolvency Practice 16. The SIP requires the administrator to report to creditors on their actions as follows.
Insolvency Practitioners should be clear about the nature and extent of their role and their relationship with the directors and officers of the insolvent company in the pre-appointment discovery period. Where they are instructed to advise the company, they should make it clear that their role is to advise the company and not to advise the directors on their personal position.
The directors should generally be advised to take independent legal advice, particularly if there is a possibility of the directors acquiring an interest in the assets in the pre-packaged new business or newco.
Practitioners must bear in mind the duties and obligations which are owed to the body of creditors in the pre-appointment period. They should be mindful of the potential liability which may attach to any person who is party to a decision that causes a company to incur credit and who knows that there is no good reason to believe it will be repaid, this could lead to wrongful trading issues.
When considering the restructuring or sale of the business or assets, the administrators should bear in mind the requirements of the Insolvency Act 1986. In administration these provide that:
• The administrator must perform his functions in the interests of the company’s creditors as a whole, and
• Where the objective is to realise property in order to make a distribution to secured or preferential creditors, the administrator has a duty to avoid unnecessarily harming the interests of the creditors as a whole.
Administrators engaged in a pre-packaged sale should therefore be able to demonstrate that they have considered the above. If creditors believe that their interests have not been considered they may complain to the Insolvency Service or the IP's regulatory body.
Where a pre-pack is used the following information should be disclosed to creditors in all cases, as far as the administrator is aware after making his or her enquiries:
• The source of the administrator’s initial introduction, in other words how did the case arrive on his desk.
• The extent of the administrator’s involvement prior to appointment and any marketing activities conducted by the company and/or the administrator.
• Any valuations obtained of the business or the underlying assets. We would always advise obtaining independent valuations.
• The alternative courses of action that were considered by the administrator, with an explanation of possible financial outcomes in each scenario.
• Why it was not appropriate to trade the business, and offer it for sale as a going concern, during the administration.
• Details of requests made to potential funders to fund working capital requirements and whether efforts were made to consult with major creditors
• Details of the assets involved and the nature of the transaction to newco
• The consideration for the transaction, terms of payment, and any condition of the contract that could materially affect the consideration.
• If the sale is part of a wider transaction, a description of the other aspects of the transaction.
• The identity of the purchaser, directors and any connection between the purchaser and the directors, shareholders or secured creditors of the company.
• The names of any directors, or former directors, of the company who are involved in the management or ownership of the purchaser, or of any other company into which any of the assets are transferred.
• Whether any directors had given guarantees for amounts due from the company to a prior financier, and whether that financier is financing the new business.
• Any options, buy-back arrangements or similar conditions attached to the contract of sale.
In my belief the pre-pack to a connected party will be a difficult "sell" now to creditors, unless all of these issues are carefully considered and noted. Where a business is pre packed to a third party, independent of the directors and possibly even secured creditors, then it will still be a powerful tool.
The Enterprise Act 2002 and case law supports the use of the pre-pack sale but I also believe that in some cases this will be open to challenge, unless ALL of the issues above are considered and answered as part of the scheme. Other wise further pre packs could face challenge in court.
Mail Online
ReplyDeleteBy Charles Sale
Last updated at 12:05 AM on 04th April 2009
Rod Bransgrove, the Hampshire cricket chairman who is deliberating whether to take legal action over the disparaging comments made about him by England Cricket Board boss Giles Clarke, will have less of his millionaire fortune for a court battle following a double whammy.
Both Southampton - in which he had a small shareholding - and the Entertainment Rights business, which he founded and whose portfolio included Postman Pat and Thomas the Tank Engine, ended up in administration in the same week.
The “Pre Pack” Administration of Entertainment Rights is a complete and utter disgrace. It is a scam designed by its incompetent lenders HBOS in their vain attempt to recover what will be a small percentage of their hugely questionable poorly conceived lending to the company.
ReplyDeleteThe entire transaction which, incidentally cost the company £7 million in professional fees, involving the original acquisition of Classic Media, the Placing and Open Offer and the loan provided by HBOS is open to serious investigation and will be addressed and is actionable.
The Pre-Pack administration should be challenged the unsecured creditors will have the right to do so as will the independent shareholders as they were not offered an opportunity to bail the company out through a fundraising.
Yes the whole thing stinks when added together with the inefficiencies and incompetence of the board of directors over the past 20 months particularly highlighted by the FSA fining the company £350,000, reduced to £250,000 for early settlement. I bet the FSA is not an unsecured creditor!
As will become plain for regulators and shareholders to see there is a lot more to follow with this one and the compensation will be worth fighting for.
In the meantime according to the Joint Administrators who are partners in accountancy firm Deloittes, Entertainment Rights plc Statement of Affairs will be available at Companies House from 29 April 2009. A creditors meeting will follow.
LP
PS. A few links for further reading:
SHAREHOLDER ACTIONS
http://www.ibblaw.co.uk/articles/index.cfm?id=1465&fid=643
FSA / Fines Entertainment Rights - £245,000:
http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/015.shtml
Pre-Packaged-Administration
http://www.companyrescue.co.uk/company-rescue/options/Pre-Packaged-Administration.aspx
How to Complain > How to complain about misuse of the ‘pre-pack’ administration process (or any other corporate insolvency process)
http://www.insolvency.gov.uk/howtocomplain/complainprepack.html
I lost 5k on these shares. For tax reasons what date is correct for my capital loss. When it went into administration or when the process is completed?
ReplyDeleteDID ENTERTAINMENT RIGHTS BOARD REPEATEDLY MISLED ITS SHAREHOLDERS?
ReplyDeleteFor several years did the board put false expectations into the market and deliberately misled and lie to its shareholders? If so why?
A thorough investigation of past RNS announcements issued by the company and ShareCast News will confirm the actions.
Why didn't the company's advisors and non-executive directors spot this years ago and why did they do nothing about it?
The so called impartial non-execs and advisors were hansomely rewarded which may be why they didn't want to rock the boat?
Top trio lead on deal to save kid’s TV favourites
ReplyDeleteAuthor: Georgina Stanley
Published: 09/04/2009 02:45
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Kirkland & Ellis, SJ Berwin and DLA Piper have advised on the private equity buyout of the media company behind iconic brands including Postman Pat and Rupert the Bear.
Kirkland’s London office advised US buyout firm GTCR on the deal, which saw Entertainment Rights’ principal UK and US subsidiaries sold out of administration to Boomerang Media, which is backed by GTCR.
The firm fielded a team from London including private equity partner Graham White and finance partner Neel Sachdev (pictured).
The deal was run as a pre-pack administration, with the acquisition negotiated over little more than a week.
SJ Berwin corporate partner William Holder advised Entertainment Rights on the deal, which also sees Boomerang take up brands including Casper the Friendly Ghost, Barbie, Lassie and The Lone Ranger.
DLA Piper advised Deloitte as administrator, with London restructuring and asset-based lending partner Lorinda Peasland leading the firm’s team. DLA Piper also advised HBOS as the company’s lender.
Sachdev told Legal Week: “The timeframe was very short and it was a great asset class. It feels very good that private equity could step in and save critical assets such as Rupert the Bear and Barbie.”
Postman Pat investors threaten legal action
ReplyDeleteDisgruntled Entertainment Rights shareholders are considering taking legal action against the group's former management and advisers.
By Amanda Andrews
Last Updated: 11:25PM BST 11 Apr 2009
Investors are considering legal action against Entertainment Rights' former management
Some former shareholders are investigating whether they have a case. The news follows shareholders' discovery that they will receive nothing following the agreement to sell the intellectual property group to Eric Ellenbogen and John Engelman's Boomerang Media.
The investors, who refused to be named, are investigating whether they have claims against some of the past and most recent executives of the company for negligence and allegedly misleading shareholders about the health of the children and family entertainment specialist, which includes brands such as Postman Pat and Rupert Bear.
After the company lost its battle to restructure, Deloitte was forced to put it into a pre-pack administration.
One source close to the former directors said the shareholders were "fantasists". The source, who refused to be named, said: "I understand their frustration, but it was a different environment two years ago [when Entertainment Rights bought Classic Media]. People were paying huge amounts for houses and companies."
The directors have been dishonest to the core and deserve to brought to account for their actions.
I am surprised the press - especially Private Eye - hasn't had more of a field day on this.
ReplyDeleteSaw the piece in Saturday's Telegraph. As a long-term holder I too am adding my voice to the growing rumble of anger over the way this company has been run, and disposed of to the convenience of the directors. I too am making my own enquiries about taking the matter further.
ReplyDeleteJust becaus the press has been fairly quiet on this subject, does NOT mean that it's gone away. I am in touch with a few like minded (ie very pissed off) shareholders, with a view to taking legal action against the company and its directors and advisors.
ReplyDeleteIt is clear that shareholders may claim against the board.
ReplyDeleteThe FSA fine last January clearly demonstrated that directors chose to wilfully mislead shareholders by withholding information that should have been available to all investors. The fact that they chose to hide the details is a clear breach of their duty of care and fiduciary duties.
This is probably not the only instance that is of use in establishing a claim as it is likely that there are other occurrences that went unnoticed by the regulators.
It also appears that the FSA investigation and subsequent penalty was the final straw that broke the ER management and brought the company to its knees.
Shareholders should consider other claims that could be brought against the company’s advisors all of which needs to be investigated.
The appointment of an investigative team needs to be actioned thereafter all will become apparent.
This Board is a complete disgrace. It seems the FSA have only just skimmed the surface to what looks like a complete insider trading scam.
ReplyDeleteI hope someone sorts this mess out so shareholders get something back.
29 APRIL 2009 - A KEY DATE FOR ENTERTAINMENT RIGHTS PLC (In Administration)
ReplyDeleteThe Statement of Affairs for Entertainment Rights Plc is to be issued by the Company's Joint Administrators on 29 April 2009.
This should state how much they gave the business away for.
We will also see by the tone of the statement whether the administrators are in the pocket of the board of Entertainment Rights.
The independent shareholders and regulators are standing by.
The Document will made available to all creditors and will be made available by the Registrar at Companies House.
29 APRIL 2009 - STATEMENT OF AFFAIRS - DUE FOR RELEASE - ENTERTAINMENT RIGHTS PLC (In Administration)
ReplyDeleteThe Joint Administrators of Entertainment Rights Plc N G Edwards and C M Siddle (both of Deloitte’s) are due to issue the Company’s Statement of Affairs on 29 April 2009.
This should provide clear details of how much they received for the disposal of the business and assets from US Boomerang Media the acquirer. It should also clearly state the shortfall if any to creditors both secured and unsecured.
It will be of great interest to all shareholders as to how the administrators intend to deal with the directors as they have clearly breached their fiduciary duties.
Those shareholders that are interested should contact the Joint Administrators at Deloitte’s Tel: 020 7936 3000 to request a copy of the Statement of Affairs for the Company.
Rob Woolsey is the assistant manager at Deloitte’s who is dealing with this.