Feeds

Letsbuyit.com teeters over debt abyss

Stares Titsup.com in the face

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

Letsbuyit.com, the online buying club for e-bargain hunters, was suspended today on the Neuer Markt, after announcing it wanted a debt moratorium.

Letsbuyit's holding company, based (for the usual tax reasons) in the Netherlands, issued a statement yesterday saying it wanted to defer repayment of debt, as allowed for in Dutch law, the FT reports.

Letsbuyit has has a torrid time in 2000 - the company missed the IPO peak at the beginning of the year, and was forced to go to market in July at a much smaller market cap than previously anticipated (it raised E66 million, against the E130 million it wanted) to cover its burn rate. This meant that its credit rating was less attractive - which meant that it could not get such favourable terms with manufacturerers, which meant that it was an even less attractive venue to buy from. This in turn meant staff and marketing cutbacks - but it's not been enough; in November the company revealed that it needed 80 million euros to see it through to expected breakeven sometime in 2002.

But where will this money come from? Not from existing shareholders, surely. They've seen the value of their investments sink since IPO - so why would they put good money after bad?

What about debt financing? Banks will lend money to loss-making businesses - but they want security (director's houses, plant, company property etc. and Letsbuyit won't have too much of that to mortgage). Or they want a loan repayment plan in which they can trust. Unfortunately for Letsbuyit, the mismatch between revenues and cash needs are far too great for any orthodox banker to stomach.

Which leaves a trade sale - by far the most likely option, if Letsbuyit is to be saved.

In November, the company announced its intention to seek a strategic alliance with an offline retailer - in effect it was putting up the for sale sign. But at what price? Letsbuyit's existing debt, continuing losses and possible warranty obligations could mean that the value of the company is already less than zero.

It will be interesting to see what Letsbuyit's creditors have to say about the company's moratorium proposals. In the current uncertainty, Letsbuyit's credit rating will be falling through the floor (and hence creditor insurance premiums on Letsbuyit debt will be raised through the roof - if granted, at all). This will affect its ability to trade. The company is perilously close to a death spiral. ®

Related stories and links

FT: Letsbuyit suspended after statement on debts
AFX: Letsbuyit.com am Neuen Markt 'bis auf weiteres' ausgesetzt - Deutsche Börse
Letsbuyit wants £48m to help it into the black
Letsbuyit boosts sales and slashes staff
Letssellit.com. Oh dear, oh dear
Letsbuyit.com pulls out of IPO (again)

Choosing a cloud hosting partner with confidence

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
Big Content outs piracy hotbeds: São Paulo, Beijing ... TORONTO?
MPAA calls Canadians a bunch of bootlegging movie thieves
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
Just don't blame Bono! Apple iTunes music sales PLUMMET
Cupertino revenue hit by cheapo downloads, says report
Hungary's internet tax cannot be allowed to set a precedent, says EC
More protests planned against giga-tariff for Tuesday evening
US court SHUTS DOWN 'scammers posing as Microsoft, Facebook support staff'
Netizens allegedly duped into paying for bogus tech advice
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
New hybrid storage solutions
Tackling data challenges through emerging hybrid storage solutions that enable optimum database performance whilst managing costs and increasingly large data stores.
Business security measures using SSL
Examines the major types of threats to information security that businesses face today and the techniques for mitigating those threats.