Monday 15 March 2021

Greensill - and Other Goings-On in the City

It is much to be regretted that CU finds himself unable to write more about Greensill** because it is a story rather up our street.  The DTel has a fairly good piece here, offering the common-sense approach to risk management in circumstances where some newcomer seems to be claiming to have discovered the philosopher's stone in a basic area like supply-chain finance.  Is this likely?  No, it isn't - even if he is fronted by Call-Me-Dave.  (Blair doesn't have the monopoly on ex-PM avarice: and let's see how the financial exploits of Boy Genius stack up ten years from now.)   Not rocket-science at all.

Just once in a while, something new(ish) really does crop up.  Securitisation was one helluva smart innovation in its time, and those quickest onboard the train (Guy Hands / Nomura / Terra Firma and, errrr, Enron) did some very good, sound business in the early days.  By the time we get to sub-prime mortgages however, the whole thing has spiralled right out of control, all rigour and discipline gone.

Which bring me to the next puzzle: the remarkable rise of the brothers Issa and their petrol forecourt 'revolution'.  I understand clearly enough how high-throughput, well-located petrol stations might have an eminently financeable profile - better even than Guy Hands' pubs, maybe.  (I say "maybe" because the margins are notoriously tight, too.) 

What I don't understand is how this rather obvious attraction could have been missed by the pretty sharp operators of big supermarkets, oil companies etc.  "Retail is detail", and they don't miss much.  So if these assets were already sitting on the balance sheets of big, smart players, (a) they would (surely?) already have been effectively leveraged to the full already, even if as part of overall corporate finance; and (b) couldn't be prised away into new ownership at anything other than a full price. 

So who've been the suckers here?  All insights gladly received.



** "I can't write at length about Greensill unfortunately, too much real life conflict. Suffice to say, he is a right twat who has met a fair ending. How people decided such an arrogant bore was worth backing to the tune of billions is beyond me"  - CU, here (BTL)


Anonymous said...

What if the "gullible bankers" are sitting in the Bank of England and have been shelling out cash to an Executive which has been misleading them.

There has been a forest of magic money trees planted since 12th December 2019. It's almost as if there is no brake on their excesses.

PM's don't have to be retired and out of office to make a hash of things.

Don Cox said...

The brake on excessive printing of money is excessive inflation. See Zimbabwe for example.

We do not yet have excessive inflation. When it does rise, then is the time to put the brakes on.

Don Cox

djm said...

So who've been the suckers here?

Step forward the Pension Fund Managers

Anonymous said...

Maybe the brothers have innovative tax mitigation or employee benefit mitigation strategies? It does seem remarkable that a local chain of forecourts seems to be equal to a supermarket giant (with currently the most competitive fuel outside of a few small specialists).

Nick Drew said...

Nice choice of words in your first sentence there, Anon

I read somewhere, scurrilously, that they may have innovative HSE mitigation strategies, too.

Surely not ..?

Anonymous said...

Diversity does seem to bring more efficient human resource policies, look at the innovative management of sex workers in London pioneered by Albanian businesspeople.

Wildgoose said...

A chain of petrol forecourts that won't sell alcohol but are probably quietly backed by Middle Eastern money and provided with cheap Middle Eastern fuel. Should they even be considered to be the true owners, or perhaps just the "official" ones?

Anonymous said...

If the green car revolution does indeed start in 2030 and no new internal combustion engines can be purchased ...
Well the brothers better have a clear exit strategy.
The majority of cars sold prior to today are likely to be no longer on the roads.
It'll be hard to find a petrol station selling petrol /diesel.


dearieme said...

There used to be a filling station near us where only a mug would use a credit card. It was a nuisance having to carry enough cash to pay for a tank full of fuel.

Charlie said...

JC, the green car revolution can't happen, because the government hasn't allocated even a tenth of the investment in infrastructure that is required to support it.

I suspect the mugs here will be the pension funds, as usual, and therefore people currently paying into them. The severity of the mugging off will depend on the fund.

For an example of spectacularly bad fund management, see here: - then take a look at the price action on any number of fossil fuel energy companies in the aftermath.

DJK said...

No insights, but I've also been wondering about the Issas. Clearly much in the too good to be true category and as others have said, there must be some deep pocketed backers, using them as a front.

Anonymous said...

More Albanian innovation.

estwdjhn said...

I wonder if there is margin from a combination of good locations and automatic unattended pay-at-pump services taking over previously independent filling stations.

Round the corner from work there was a Murco filling station, open 8-6, with someone in all the hours it was open.
Not a lot of competition in the immediate area, but fuel was 3-5p/l over the going rate at the local(ish) supermarket.

About a year ago, it was sold on, the pumps replaced with pay at pump machines, the kiosk permanently shuttered, and it's open 24/7 priced about 3p/l cheaper than the nearest supermarket (and only 1-2p/l dearer than the cheapest fuel in a 50 mile radius).

I'd imagine their overheads are well down, whilst sales volumes are through the roof (it's on a busy stretch of the A6). I've certainly have gone from using it only when desperate, to filling up fairly regularly (to the loss of my local supermarket).

I can see how with a bit of nous buying up a resetting these businesses could be a sustainable business model.