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Back in March 2008 the great Midas furphy was born when Phillip Bonney said: "With the support and breadth of experience of our two new shareholders, the Midas Group is now well positioned to implement an aggressive growth strategy for the Australian market." Yesterday the administrator of Midas advised the creditor's meeting that in fact, John Fletcher and Lazard Carnegie Wylie did not buy into the failing Midas.
LCW were foolish enough to throw an awful lot of money into a venture that the automotive industry in Australia expected to collapse. The March ‘furphy' was designed to give confidence to suppliers of Midas who had previously placed a strangle hold on credit to anything ‘Bonney'. Now many will lose $millions.
For LCW, 2009 begins with Midas where 2008 left off with a string of disastrous investments; most notably Commquest's dramatic slide from $1.20 to .04c. John Wylie's only claim to fame; "Wylie was the legendary auctioneer who literally raised $30 billion selling off Victoria's energy assets to a range of gullible foreign utilities who now hold assets worth about $20 billion."
John Fletcher's not-so-illustrious career has taken an unusual turn where this time around it is his money lost rather than the shareholders at Brambles, then Coles/Myer etc.The administrator has seemingly been instructed to use the failure of the Midas LPG program as the reason for the collapse. Midas franchisees have been warning of this end since 2004 and here in 2006/7; long before the LPG program was considered and brought down as a result of damaged creditor confidence and consequential supply difficulties.
Creditors at the meeting report that a dejected Philip Bonney attended following a miraculous recovery from his recent mystery ‘illness' and spent the morning eye-balling his shoes. We are now advised that Bonney is personally responsible for all Midas debt.
The meeting summary;
Midas were found to be insolvent 23 December 2008.
Two (2) secured creditors; National Australia Bank for $1.5M and Lazard Carnegie Wylie for $12M.
Two (2) ROT secured claims against such things as equipment and the administrator anticipates more of these.
Unsecured creditors ‘so far'; estimated at $4M plus.
In the 2 weeks since the administrator has had control of Midas the operational loss was estimated at $500,000. Eight (8) Midas company shops have been closed ‘so far'. The administrator has applied to the Court for an extension to the administration until late February when it is hoped they can find a buyer.
The administrator offered 3 scenarios;
Sell Midas in whole - Liquidate Midas - Reach a Creditor's Agreement
To be brief; the speculation amongst creditors is this: Bonney will be driven to bankruptcy; presumably in a 1974 Corolla, and creditors will get 'nada'. No one would buy Midas, the 12 interested parties are ‘tyre-kicker scavengers'. The company program must be dismantled and there isn't enough at Midas to make liquidation an option. Lazard Carnegie Wylie instigated the coup and the sham administration knowing they would offer a trivial deal to creditors and walk away with a Midas operation cleansed of debt and unwanted leases.
To be brief; here is the LCW problem. They are not capable; no one is, of rebuilding Midas. As a franchise it's reputation means it is dead. But all there is left is half a small network of franchisees struggling within a financial model that will continue to see them fail. LCW will not retrieve their $12M investment. The Midas saga will be reborn and continue. When it was thought impossible, the Midas brand is heading further down the toilet.
The question on everyone's lips; "Where do Midas International stand?" Their Chicago office only contacted the administrator minutes before yesterday's meeting; leaving a request for a return call. Midas International no have an opportunity to cut their ties with the embarrassing Australian operation.
Personally, I don't believe you can expect Midas International to finally act in good faith or to value their brand. They have ignored this situation since 2004.
Most hope Alan Feldman and Alan Marr will withdraw the Midas brand as their Australian franchisor has breached the contract. This would leave what? No brand would mean Midas is a nothing and the Midas disaster for franchisees would be over. LCW would suffer more embarrassing loss; but who really cares?