Outlook Lord Kirkham, King of Sofas, provides us with a tale for our times.
In the heady days before the financial crisis, when banks would lend a billion over a bottle of Mouton Rothschild on any old bits of bricks and mortar, he split his DFS retail empire into two: a property company and a trading company (which he later sold for £500m).
The property company consisted of 22 DFS sheds, four distribution centres and company's head office in that property hotspot of Doncaster. Banks flocked to lend him the money in a sale-and-leaseback deal reportedly valuing the buildings at £150m in 2005. By 2007, when more banks were invited in to refinance the debt, they were valued at £250m. What had changed? Nothing, except the banks had got even stupider.
Yesterday, those banks decided it was finally time to cut and run. They pulled the plug and sold their loans on, bearing multi-million-pound losses. Now take a guess which were among the biggest to get burned. You got it, bailed out Bank of Ireland and our very own RBS. Like I said, a very modern tale.
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