QVC’s creditors have a nasty case of buyer’s remorse

{"text":[[{"start":4,"text":"Impulse buying a carrot-julienning gadget from a late-night TV infomercial can easily end in disappointment. Some backers of shopping channel QVC must similarly wish they had spent their money elsewhere. Its bankruptcy case risks leaving them with, at best, a sliver of their original investment. "}],[{"start":21.85,"text":"Once a household name, QVC filed for protection from its $6bn of debts in a Houston court last month. Its reorganised enterprise value is about $2bn. The company had hoped a judge would approve its restructuring plan in fewer than two months; that ought to have been possible given the months of negotiations that preceded its Chapter 11 filing."}],[{"start":45.7,"text":"One stakeholder group, though, was apparently not in the loop: holders of $1.4bn worth of QVC preferred stock, currently set to get wiped out. These investors have duly lodged a protest, asking the court for their own formal bankruptcy committee. The preferred shares have recently tripled in price to $6, although that’s still 94 per cent less than their face value. "}],[{"start":null,"text":"

"}],[{"start":68.25,"text":"The thrust of their argument is that the preferred shares were issued by a parent company that still has roughly $200mn in cash as well as an equity stake in a catalogue business known as Cornerstone that ought to belong to them. QVC’s other debts were issued by subsidiaries farther down the pecking order. The company’s directors, though, decided that the $200mn really belonged to those subsidiaries from whose profits it originally came. "}],[{"start":96.05,"text":"Financial gymnastics are commonplace in debt reworkings. But QVC is a good example of how speed is a factor in such court processes too. Businesses on the verge of going under want a quick solution, so have an incentive to sideline creditors who might be problematic. Judges often want speed too, so that the company doesn’t die on their operating table."}],[{"start":116.1,"text":"Can QVC be saved? The former TV icon may never recoup its 1980s glory, or the $14bn of annual revenue it enjoyed before the coronavirus pandemic. But with $9.2bn of sales last year, the company is not insubstantial. While an attempt to pivot to social media retail via platforms like TikTok, and digital distribution, has not yet generated a turnaround, stripping away QVC’s heavy debts could give it a fighting chance. "}],[{"start":145.25,"text":"Preferred shareholders have a fight ahead. Every other major stakeholder has already signed up to the deal — and notably, suppliers to QVC, who include numerous small businesses that used it as a sales channel, are not being asked to sacrifice their claims. QVC shoppers can usually get a refund if their real-life carrot matchsticks don’t look like they did on screen. Creditors can’t rely on the same treatment."}],[{"start":176.7,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778980339_8766.mp3"}