Friday 30th of November 2007

Well, the first thing is that all those rumours were true! I had often heard that Capital + Merchant were in a vulnerable position and so it is proved to be correct. Why didn't we report that? Well we are in the business of facts, not gossip. One thing that is useful to point out is that C+M probably didn't do itself too many favours in the publicity stakes over recent times. Often when media approached the company for comments and they were refused information. Likewise, the company did a bit of hiding itself and never was too open about its ultimate ownership. A couple of things which are useful to note about this latest failure are that relying on the existence of a wholesale funding line isn't a guarantee of longevity. Wholesale funders tend to set covenants around their support and make sure they have outclauses. Added to this there is talk that some funders are facing as squeeze themselves thanks to the sub-prime crisis in the United States. C+M's issues, at this stage appear to be difficulty in getting Mum and Dad debenture money, even though they had a high media profile through their sponsorship of TV One news. I have noted before that there is a potential flag when companies take on promotional activities out of kilter with their size. It maybe debatable whether C+M definitely fell into this category, but it is worthy of contemplation. Out of this collapse have been renewed calls for compulsory credit ratings. I don't agree with comments from the Consumers' Institute calling for mandatory ratings. As I have said previously mandatory credit ratings are no panacea for the sector. Yes, they are useful, but they are not a panacea. The good news is that, thankfully, I am not hearing too many other rumours about shaky companies, but no doubt there are still some out there which will struggle to survive.