David Prosser: JJB presents its landlords with animpossible decision

There is no pretending landlords can be pleased with what has happened at JJB and they will be more cautious in the future


Outlook It is not the most appetising of choices. The proposal presented by JJB to the landlords of around 90 of its shops is pretty brutal: let us halve our rent payments over the next two years or we'll have to put the company into administration, in which case you'll get nothing.

Presented with this sort of choice, many of us would be tempted to tell JJB where to stick its company voluntary agreement (CVA). If it can't pay its rent at the agreed rate, why don't landlords get someone in who can?

The answer lies in the fact that the commercial property market is stacked against landlords. Almost one in seven of Britain's shops stands empty, rising to one in three in the most blighted towns (and you can assume JJB is talking about its most underperforming locations with this CVA). So even if landlords were able to find a tenant to replace JJB, they would expect to face a tough negotiation – probably one generating less rent than JJB is offering to pay. Here's the good news. Though many analysts are sceptical, JJB's new management team appears to believe genuinely that if it can get this restructuring away, a new business model focused on specialist sports retailing makes it a viable business. The handful of stores that have already been converted to this sort of format are performing strongly, it argues.

Moreover, the structure of this CVA is a new departure for the insolvency industry. It offers creditors who accept the deal an additional payment in 2013 if the company has proved able to put its troubles behind it.

In other words, JJB is offering some jam tomorrow while asking landlords to accept pain today. This is the first time a retailer has offered a share of the upside in a CVA. Nevertheless, there is nopretending that landlords can be pleased with what has come to pass at JJB – and it is likely to make them even more cautious in their future dealings with retailers.

The pioneers of the CVA model say that such restructurings, for the first time, offer a way for businesses to right themselves that stops short of full insolvency – and that this is in the interests of everyone, including their creditors. Maybe so, but the fine print from KPMG, JJB's adviser, reveals that the deal is the equivalent of offering landlords around 29p for every £1 they are owed.

That's 28p more than KPMG reckons they'd get back from an insolvency, but it is still 71p gone begging.



What will News Corp have to pay for Sky?

So, just how much is BSkyB worth to Rupert Murdoch's News Corp? A great deal, clearly, given the high stakes poker game it has been playing for the past three months – and winning, judging by yesterday's announcement from the Culture Secretary.

There is certainly no chance of BSkyB's board reconsidering its view last year that 700p, News Corp's opening offer for the shares it does not own, was at least 100p short of a fair price. The question is how much they will hold out for.

Mr Murdoch can blame his son James for the high price that is being demanded. Eight years ago, when the media mogul appointed his then 31-year-old son chief executive of Sky, there was a revolt from shareholders concerned that nepotism had ruled over good business practise.

In fact, Mr Murdoch proved to be a transformational boss for the company, turning it into the growth stock that Sky has become. His achievement was to recognise that Sky's loyal subscriber base was hugely under-exploited: TV packages were poorly cross-sold and the possibility of selling telephone and broadband services had not been explored.

Having addressed that, Mr Murdoch moved to a bigger job at News Corp, leaving a business that is hugely attractive just in terms of the cash it generates, even leaving aside the strategic opportunities the merger now offers. Sky's board knows its value and is legally obliged to ensure its shareholders do not miss out.

A specific valuation is very difficult to arrive at – there has not been a comparable deal anywhere in the world, which might provide a yardstick.

For what it's worth, the stockbroker Charles Stanley reckons that on this year's forecasts, a bid of 800p would value Sky at around 20 times' earnings – and that this would be pretty undemanding for a company where earnings growth shows no sign of slowing.

The market agrees, pricing Sky at around 820p yesterday. The Murdochs are going to have to play another shrewd hand to get this business at a price closer to 800p than 900p.



There's life in the banking sector yet

All is not lost for those who worry about the lack of competition in Britain's banking industry. We wait with interest to see what Sir John Vickers' independent review of the sector comes up with later this year – and competition is likely to prove a more fruitful line of inquiry for him than structural risk – but in the meantime, some new entrants are emerging at last.

Take Metro Bank, which got its banking licence a year ago on Saturday and has since opened five branches (another seven will follow in 2011). It's a South-east-only venture for now and it is early days, but so far the model has been much more successful than almost anyone – its backers included – were expecting.

Then there is Aldermore, the new banking venture that makes loans to business: its funding of small and medium enterprises had climbed to £410m by the end of last year, it said this week, double the total at 2009.

These banks remain small players, but in a competitive environment in which KPMG predicted yesterday that the big banks would all begin charging for current accounts within five years, their emergence is welcome. Over to you, Sir John.

Start your day with The Independent, sign up for daily news emails
Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appeal
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Sport
Ched Evans in action for Sheffield United in 2012
footballRonnie Moore says 'he's served his time and the boy wants to play football'
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture