More NewsOn the money with Gavin Hinks

On the money with Gavin Hinks

The credit crunch has claimed another victim...

Gavin Hinks, AccountancyAge

This time it was Karim Naffah, FD at pub chain Mitchells & Butler, owners
of low rent eateries like Harvester and the much trendier All Bar One.

Right now it looks like Punch Tavern could be in the running to gobble up M
&B, but this acquisition is one made possible principally because M&B
managed to bodge a hedging arrangement intended to offset the risk of a
bank-backed property deal.

The deal collapsed because the debt market suddenly looked a lot less
inviting and
the bank pulled out leaving M&B with a hedge that also bombed.

The result? A loss of more than £270m and Naffah falling on his sword.

Except, its difficult not to feel sorry for Naffah. Indeed, many FDs may be
sitting nervously at their desks thinking ‘there but for the grace of God…’

Naffah took advice from plenty of experts (including KPMG, JC Rathbone, and
Citigroup), the financial backing looked set in stone and the deal was in
partnership with Robert Tchenguiz, the property tycoon. This should have been a
set of people to instil confidence in any deal.

Yet, despite all those prestige names, Naffah looks for all the world to have
carried the can alone. No other board members have parted company with their
keys to the executive washroom.

That must give FDs everywhere food for thought. You can pay all the money in
the world for advisers to assess the risk, structure the finance put some well
intentioned shine on the deal ­ but if it all goes belly up, you will be the one
expected to do the honourable thing.

FDs may have moved away from being mere number crunchers in the corner, but

they have certainly paid the price for it.

Gavin Hinks is editor of Accountancy Age

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