BusinessCompany NewsMitchells & Butlers FD goes in hedge calamity

Mitchells & Butlers FD goes in hedge calamity

Naffah tenders his resignation after credit crunch left pub group holding hedges, but unable to complete a transaction they were intended for

Mitchells & Butlers finance director Karim Naffah has quit the company
after a disastrous hedge and the credit crunch led to an extraordinary £274m
loss.

The pub company revealed today that as part of a property venture, it had
taken out hedges against interest rates and inflation. But in the course of
carrying out the transaction, the market turned against M&B, leaving it with
only the hedges.

‘At the end of last financial year, an exceptional accounting loss of £155m
post tax was booked in respect of the hedges. The above settlement of the
majority of the hedges results in a further £119m post tax exceptional loss
which will be taken in the current year,’ the company said in
a
statement
.

Naffah offered his resignation and the board accepted, it added. The chief
executive also tendered his resignation but was turned down. Jeremy Townsend,
currently deputy finance director, takes over from Naffah.

‘The process was started in mid-July, two weeks before the planned
announcement date of the transaction. This was on the banks’ advice that the
hedging could take some time to execute given the relatively low liquidity of
the inflation swaps market,’ the company said.

‘Whilst the details of the debt package were being finalised with the banks,
there was a material adverse change, with debt market conditions suddenly
deteriorating in late July and the credit-approved debt terms from the banks
were withdrawn. This left Mitchells & Butlers and R20 with hedge instruments
in place but unable to fund the transaction,’ it added.

M&B could have held on to the instruments but decided that it was not a
risk that it should be running.

All of the executive board have forgone their bonuses as a result of the
calamity.

Further Reading:

Read
the stock exchange announcement

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

4d Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

4m Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

4m Alia Shoaib, Reporter
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

8m Emma Smith, Managing Editor
Mazars strengthens audit team with partner appointment

Accounting Firms Mazars strengthens audit team with partner appointment

8m Emma Smith, Managing Editor
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

7m Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

7m Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

8m Emma Smith, Managing Editor