Dick Smith is the Greatest Private Equity Heist of All Time

[VK3DRB]

According to news reports Dick Smith owes more than A$140 million to its banks as well as more than A$200 million to creditors.

Who gets first suck of the sav?

If they go under and everything is sold off, the receivers get paid first, then the tax man, then employees and finally everyone else. Don't ever think receivers are kind hearted altruists.  They are in it for the money. Their hourly rate makes plumbers look like volunteers working in an op-shop.

[Tandy]

Who gets paid what depends on the priority status as a creditor as follows.

Receivers fees, in some respects this makes sense as nobody would take on the job if they were not confident of getting paid.

Secured Creditors Typically banks are fixed charge holders, i.e they effectively own all of the assets of the company while the debt remains. The receiver is appointed by the banks and their primary responsibility is to liquidate those assets to repay the banks.

Priority Unsecured Creditors In Australia employees of the company have a right to priority of payment for wages outstanding. Personally I think this is fair as it is bad enough loosing your job, the last thing you need is to not get paid for the work you have done.

Unsecured Creditors Unsecured creditors include companies that sold goods or services to the company, ie, suppliers, the Australian Taxation Office and consumers who have gift cards and warranty claims. Each group in this category will be given a percentage of the remaining funds.

Where the system is open to criticism is that for example, in this case the best offer to buy the brand name, store leases and goodwill for could be A$100 million. This effectively means someone is buying the business without any of the unsecured debts. So suppliers and consumers get nothing but the banks get all but $40m of their loan back.

If however they managed to raise $200 million then the remaining $60 million would be shared among all the unsecured creditors, so the reported $200 million owed would mean that for every $100 owed the unsecured creditors would get about $25.

* Note this is how it works in Australia other countries are not the same.

[nctnico]

So there is no insurance for the employees? In the NL every comany has to pay an insurance premium to the government which is used to pay the employees if the employer is incapable of paying the salaries. This insurance only covers 13 weeks so it happens regulary that employees file for a bankcrupty.

[Tandy]

Australia has Fair Entitlements Guarantee (FEG), previously the General Employee Entitlements and Redundancy Scheme (GEERS).

The FEG is a scheme of last resort, to assist employees who have lost their job because their employer entered liquidation or bankruptcy. The Australian government would rather that employes who are owed money are paid from the proceeds of the liquidation, hence why they have a priority status.

[dannyf]

employes who are owed money are paid from the proceeds of the liquidation

Certain states in the US have that as well.

The net results is that lenders are worry about making a loan in those states, reducing capital investments and job opportunities. Essentially, prospective employees ***pre-lost*** their jobs before they had the chance to have it.

[nctnico]

Australia has Fair Entitlements Guarantee (FEG), previously the General Employee Entitlements and Redundancy Scheme (GEERS).

The FEG is a scheme of last resort, to assist employees who have lost their job because their employer entered liquidation or bankruptcy. The Australian government would rather that employes who are owed money are paid from the proceeds of the liquidation, hence why they have a priority status.

I forgot: In the NL the government will also try to get the money they paid to the employees back from the liquidation proceeds (ofcourse). The idea however is that the process is as hassle free as possible but usually it isn't. Been there, done that and it is not funny to go to the supermarket with only a few coins left which where -so to speak- scraped from the between the cushions on the couch while waiting until the money gets paid.

[HackedFridgeMagnet]

Here is the quick summary from probably the best financial journalist in Australia.

http://www.smh.com.au/business/retail/dick-smith-float-looks-like-window-dressing-20160205-gmmg88.html

This suggests the inventory balance shown in the prospectus for the float is false. If this is the case, those who bought shares in the float, mostly super funds, have been played for mugs

Short list of Winners: Anchorage, Deloitte, Ferrier Hodgson

Short list of Losers: Staff at DS. People with money in Australian Super funds.

[EEVblog]

That's it, it's all over:
http://www.smh.com.au/business/retail/dick-smith-to-close-all-stores-3000-staff-to-go-20160225-gn3ios.html

[TerraHertz]

People and companies who borrow money do so with a promise to repay the debt. The money lent is other peoples money not the banks money.

'is other people's money' - This is the commonly held myth, and it's a lying pretense. Not at all how the Western banking system actually operates.
Bank loans are the primary origin of all new money into the economy. When a bank 'makes a loan' to someone, they literally create that money from nothing, and deposit it into the account of the borrower. As such, banks commit fraud with every loan. There is no 'consideration' on their side of the loan contract, since they deliver nothing of any cost to them.
If you wish to learn some things you didn't know about banking, here are a couple of lists of links:
  http://everist.org/archives/links/__Banking_links.txt
  http://everist.org/archives/links/__Banking_fractional_reserve.txt

[mrpackethead]

Bank loans are the primary origin of all new money into the economy. When a bank 'makes a loan' to someone, they literally create that money from nothing, and deposit it into the account of the borrower. As such, banks commit fraud with every loan. There is no 'consideration' on their side of the loan contract, since they deliver nothing of any cost to them.

Thats reserved for central banks nromally under the control of government order.  When you do that you devaule the currency ( its called printing money )..   Privately owned banks are absolutely not allowed to do this, and there is ( at least in this end of the world ) very tight regulation on such behavior!

[EEVblog]

That is complete and utter nonsense. Commercial banks do not manufacture money.

Yes, they do. It's called fractional reserve lending.
https://en.wikipedia.org/wiki/Fractional-reserve_banking

Because bank deposits are usually considered money in their own right, and because banks hold reserves that are less than their deposit liabilities, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying reserves of base money originally created by the central bank.

[sleemanj]

Do we really want this thread to devolve into a "bankers are evil" thread, that won't really be a very interesting discussion I feel.  It wouldn't be long before somebody started harping on about a return to the Gold Standard.

Maybe we could get back to some discussion about DSE.

Found this on another forum...




Link to contents on archive.org

[EEVblog]

Found this on another forum...

I once threw out my collection of DSE and Tandy catalogs I had since I was a kid, including every monthly Tandy flyer 

And interesting that Tricky Dick was on the cover given that he sold the business a year earlier

[TerraHertz]

Found this on another forum...

There's a Speak and Spell hanging on the wall behind them. Remember those?

Edit to add:

Gnnfff... I'm _trying_ not to derail. But then you say things like:

How do those links support your case? They seem on cursory glance to simply show you do not understand the different role of a Reserve Bank and a Commercial Bank.
Only governments can create money from nothing.

Well there's another surprise for you. The US 'Federal Reserve Bank' is not a US federal government instrumentality. It's a commercial bank, totally privately owned. And governments have not 'created money', since (in the USA) they gave away that right to the bankers in 1913. Even earlier for many British and Continental governments. Oh, I'm sorry, there was an exception - Pres Kennedy had the US government begin issuing notes not sourced from banker loans. One of his several unforgivable sins in the eyes of various forces.

Governments take out loans (usually from banks) when they issue government bonds - usually 'bought' by banks with money the bank just created. Then guess where the money to repay with interest is going to come from?
There's a great deal of smoke and mirrors in this topic, because it's at the root of raw power in this world, and the truth is not pretty. So there are beautifying myths... which I once believed, just like you.
More on that:
  http://everist.org/archives/links/__FED_US_Federal_Reserve_links.txt

But, you won't learn anything at all from cursory glancing.  You might try watching a short video called 'the eleventh marble'. Or, a book 'The Creature from Jekyll Island' by G E Griffin.

Some friends of mine (in the bullion market coincidentally) put some effort into an attempt to find out who owns the Australian reserve bank. Last I heard they had not succeeded.

Oh, and banks (the Commonwealth Bank specifically) also steal directly. My personal experience: http://everist.org/doc/base/title_deed/title_deed.htm (That page needs more work.)

[sony mavica]

sad to see there stores closing down but they should have some good closing down sales

[nowlan]

I thought they sold off all stock, to prop up capital for float?
I walked past the local DSE last week, and they were closed to organise clearance items.

"When I owned Dick Smith it was a company selling electronic components. I've never been involved in consumer electronics I don't know how anyone could make any money out of it," Mr Smith said."

Dont think anyone making money selling components either. Im sure JB HIFI+hardly normal make money sell box goods.

[EEVblog]

The receiver's job is to sell off the company's remaining assets, to repay the creditors (as much as possible). So they'll stay in business as long as they have stuff to sell.

The receivers first job is to ensure that the receivers get paid first, at exorbitant rates, seriously.

[EEVblog]

I think that is a gross misrepresentation of the true situation in that it implies unfettered money creation. When in fact there are rules and very real consequences for a bank in the event that it's liabilities exceed its assets.

You mean like the US banks that almost went belly-up, and instead of "very real consequences" got given 10's of billions of dollars for free with zero accountability and promptly went and used the money to give all their executives huge bonuses? That "rules and very real consequences"?

[EEVblog]

Well there's another surprise for you. The US 'Federal Reserve Bank' is not a US federal government instrumentality. It's a commercial bank, totally privately owned. And governments have not 'created money', since (in the USA) they gave away that right to the bankers in 1913.

Yes. And that everyone is THE Greatest Private Equity Heist of All Time!
Staggering brilliant in it's conception, execution and longevity.

[VK3DRB]

I once worked for a once great technology company bought by a mob I call Private Equity Parasites. Let's just say, if you ever get taken over the private equity, look for another job as soon as you can.

I feel sorry for the Dick Smith employees who worked diligently for relatively little pay. I wonder if Mr Dick Smith is going to help them out. But I bet your bottom dollar the greed mongers behind Anchorage Capital won't be helping the employees one iota.

Bring on the government inquiry into Anchorage.... http://www.anchoragecapital.com.au/case-study-dick-smith

[mswhin63]

The receivers first job is to ensure that the receivers get paid first, at exorbitant rates, seriously.

True, but there are only greedy "so called qualified" people running the industry and if they DON'T get paid exorbitant rates the whole receivership system would collapse. Would have been nice if it was regulated years ago but realistically years ago corruption was quite common-place and almost accepted this has lead to charging standards in the industry. Even with corruption easily audited now in the industry the receiver managers would never reduce their rates to more fair and realistic values.

My little rant

[GK]

All right. In the interests of civility and the other members of this forum I withdraw my earlier remarks. Your interest in financial matters obviously exceeds mine. And therefore perhaps your knowledge does too. Although that in and of itself is no great claim.

http://www.federalreserve.gov/faqs/about_14986.htm

Who owns the Federal Reserve?

The Federal Reserve System fulfills its public mission as an independent entity within government.  It is not "owned" by anyone and is not a private, profit-making institution.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by the Congress, which often reviews the Federal Reserve's activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as "independent within the government" rather than "independent of government."

The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.


Some further reading on the particular definition of "ownership":

http://www.frbsf.org/education/publications/doctor-econ/2003/september/private-public-corporation
http://www.businessinsider.com/who-actually-owns-the-federal-reserve-2013-10/?r=AU&IR=T

This article addresses the "sinister/foreign control" conspiracy theories:
http://www.usagold.com/federalreserve.html

[rrinker]

I once worked for a once great technology company bought by a mob I call Private Equity Parasites. Let's just say, if you ever get taken over the private equity, look for another job as soon as you can.

I feel sorry for the Dick Smith employees who worked diligently for relatively little pay. I wonder if Mr Dick Smith is going to help them out. But I bet your bottom dollar the greed mongers behind Anchorage Capital won't be helping the employees one iota.

Bring on the government inquiry into Anchorage.... http://www.anchoragecapital.com.au/case-study-dick-smith

Eh, maybe. For the past 13+ years I've been working for a company owned by a private equity firm. It was formed by the private equity firm acquiring my company (so I haven't really changed jobs in nearly 20 years, just was bought out) and another. Since adding 4 other companies to the group. I don't know what goes on behind the scenes with the top management, but generally the equity group leaves us alone to operate on our own. In the beginning they were a bit more hands on, when the original merger first happened I got to meet the senior partners of the equity firm and they were very open with their intentions.

[coppice]

The receivers first job is to ensure that the receivers get paid first, at exorbitant rates, seriously.

A friend in the UK told me the first sign he gets of bad times is his brother in law visiting Mercedes dealers. His brother in law is a receiver.

[chrisc]

Read today they are all shutting down. While the company today is for all intents and purposes a completely different entity than it was in the 70's and just happens to share a similar name, I can't help but feel a little pang.

I got into electronics in the 70's while living in country Queensland. My first serious purchase of tools and parts was a mail-order from DSE in Sydney (this was before they had any Queensland stores). Later they opened in Buranda while I was going to school down there and I'd walk there in the afternoons maybe twice a week for a few years.

I still have a few odd items I got from them in the 70's, including a Q-1136 analog multimeter (I didn't even need to look that number up as it's stuck in my head - I had to save my allowance for six months before I could buy it. I would look at it in the catalog every week when I put the money away!)

I'm pretty sure I still have that catalog buried in a box somewhere.