MFI - next for Administration

1 August 2008

So the next big retail failure is probably going to be??? Well perm one of many?

I think reading the press, that that the announcement that Paul McGowan and Andrew Pepper of Hilco have "joined the board" of MFI heralds the break up or failure of that long running saga called MFI.

Hilco have been spending the last 5 years sniffing out value, discussing deals, making sharply discounted offers, pressing directors to accept as SECOND last resort. "Hey the last resort is Administration ". Anyway they know their onions and have tabs on most struggling multiple retailers.

With a well connected team in the retail world, and some very quick witted people they are well positioned to pick up the retailers with lots of stock, good sites (alongside some rubbish ones) and no future.

You will see the Hilco name more in 2008-2010. What about MFI though?

So lets say MFI has senior debt, bonds, junior debt and lots of suppliers (unsecured debt). They may have rent arrears (stuffed landlords - that's a technical term), too many employees and a failure of management. So that's a classic distress buy for Hilco.

My bet is you will see the following:

Closure of stores.

De-stocking

Suppliers will be asked to wait.

Employment levels will fall.

Then covenants (bank/senior/junior debt) will be breached.

Hilco will acquire the business

Hilco will trade it for some weeks (de-stocking and leveraging debt)

Then Hilco will "flip" the business to a buyer.

Good luck shareholders of MFI?