Another indignity for BC Partners, the private equity whizz-kids who took the inspired decision to buy estate agency Foxtons right at the top of the property market: they’ve been forced to cede control of the estate agency to the banks, as part of a restructuring deal to slash its debts. If it wasn’t already clear what a stinker of a deal Foxtons was, it certainly is now. But since hubristic financiers and pushy estate agents are considered to be among the chief culprits for the credit crunch, sympathy will probably be in short supply...
A few years back, Foxtons was one of London’s biggest success stories: famous for its ubiquitous liveried Minis and ‘aggressive’ sales tactics (to put it mildly), it grew fat on the capital’s property boom. When the publicity-shy pointy-heads at BC – previously considered to be among the smartest people in private equity – took the fateful decision to buy the business in May 2007, it netted founder Jon Hunt the best part of £360m (making him one of the recession’s Great Escapees).
Sadly however (well, depending on your point of view), the crash sent its sales plunging by 60% - about twice as far as BC’s worst case scenario (doh). This meant its new owner couldn’t service the loans it had taken out to buy the business, with the inevitable end result that it’s had to hand over majority control to the banks. In exchange, according to the FT, its lenders will reduce the debt from £300m to about £120m. And the company itself will survive, which will please those of you who need a pushy estate agent to flog your house any time soon.
Nor is BC giving up entirely (perhaps on the ‘in for a penny, in for a pound’ principle). It’s apparently pumping in an extra £50m or so of its own to remain the biggest single shareholder; this will give it some rights, although the banks can now gang up and out-vote it if they wish. The chastened buyout firm is positioning this as a way to strengthen the balance sheet ‘to complement Foxtons' strong trading performance’ – and indeed, the estate agency has seen business take a turn for the better in recent months. Presumably BC’s theory is that this will allow it to recoup at least some of its losses as the property market recovers.
It’s also a significant moment for Hunt; under the terms of the restructuring, the FT says he’s written off a loan of undisclosed size to Foxtons, thus severing his final tie with the company. Still, that £300m he has in the bank should ease the pain a bit...
In today's bulletin:
Virgin launches retail banking push with Church House deal
Bernie Ecclestone wants to take the driving seat at Saab
Banks take control of ailing Foxtons
Is (a lack of) office politics hindering women's progress?
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