McColl’s saga is lesson banks must take onboard with recession looming

theguardian.com:

All’s well that ends well? Not quite. McColl’s has obviously got the right rescuer in the shape of Morrisons, the biggest supplier by far to the 1,100-strong convenience store chain. But David Potts, the chief executive of Morrisons, was entitled to say he was “disappointed” that this mini-drama involved McColl’s going into administration at all. He could have said “furious”.

His group’s proposal at the end of last week to take the business in solvent form appeared to tick the main boxes. It protected pensioners, sought to maximise employment among McColl’s 16,000 staff and allowed bank lenders to switch into Morrisons-backed debt with a superior covenant. Most of all, the plan had commercial sense in its favour: with 250 McColl’s stores trading under the Morrisons Daily banner, so the major supermarket had a strong incentive to make the mismanaged operator work. It has looked the natural owner of McColl’s for weeks, if not months.

So why were administrators summoned by the banks last Friday? The answer to that question seems only to be the fact that the rival proposal from EG Group, the petrol forecourt business owned by the Issa brothers of Asda fame, would have seen lenders get paid in full upfront. Put another way, the banks – understood to include Barclays, HSBC and NatWest – prioritised certainty for themselves even though the EG proposal, at that stage, created uncertainties for McColl’s pensioners who were exposed to the risk of a cut in their benefits.

As it happens, Morrisons succeeded over the weekend by matching EG’s offer to the banks (and EG, incidentally, improved its pitch to pensioners by saying it would have accepted full responsibility for the two pension funds). But the sour taste left by this saga is