Compare and contrast. As Greece raised money in the bond markets for the first time in three years on Tuesday, prime minister Alexis Tsipras declared that the fundraising was “the most significant step to finish this unpleasant adventure”, meaning the country’s bailout.
Back in April 2014, when Greece was returning after a four-year absence, the country’s finance minister drew a similar moral. The return to international borrowing markets was “a catalytic undertaking,” he said. The crisis soon returned. The next bailout followed after a referendum on the terms of austerity.
Is this time different? Has the end of the Greek debt crisis finally arrived? The omens are better in the sense that the economy is finally growing and the International Monetary Fund is lobbying for meaningful debt relief. But the hard fact remains that the country’s debt-to-GDP ratio is enormous at 180%. And, while raising €3bn (£2.6bn) of five-year money at 4.6% is impressive in Greece’s position, the bailout funds are still priced at lower rates of interest.
Sadly, thinktank Capital Economics’ verdict looks correct: “Unless the eurozone creditors agree to much deeper debt relief than that which is now on the table, it seems fairly likely that Greece will require a fourth bailout when the current one expires next August.”
Safestore share-grab sets bad precedent
Alan Lewis, chair of Safestore, says he appreciates that the storage firm’s new incentive scheme, which could pay out £28m-plus to executives over the next five years, has “divided opinion”. He’s putting it mildly. Safestore, in its second attempt to win over shareholders, secured a narrow victory on Tuesday – 51% of votes were in favour and 49% against.
Lewis’s executives owe him a large drink for his lobbying efforts. He has managed to get this scheme across the line in the face of opposition from influential proxy voting agency ISS and a red-flag warning from the Investment Association, the establishment fund management trade body.
It is hard to understand why the 51% rolled over. Safestore trimmed the number of shares on offer to the executives by a fifth since the first draft but the scheme could still hand 37 managers some 3.25% of the company’s entire share capital. Why?
Safestore’s argument boils down to its preference for a model in which its top folk accept sub-market salaries in return for large potential windfalls. “Our corporate philosophy is simply that no one in the business should get rich by just turning up each day,” says Lewis.
Very admirable in theory, but it’s not how everybody views the details. The executives would still get 49% of their jackpot just for hitting City consensus forecasts, noted ISS. That would mean chief executive Frederic Vecchioli getting £4.2m for what would be considered a par score. This is a FTSE 250 storage company, remember, not an international corporate titan. As ISS put it, the level of rewards is exceptional but the performance targets “do not appear to be commensurately and exceptionally stretching”.
However much Lewis argues otherwise, there is a strong sense here that Safestore is trying to reward past success. The company has indeed done well under Vecchioli but it’s not obvious why he needs fatter rewards than the £1.5m he collected last year to continue in the same style. This looks to be a share-grab by a management that judged correctly – just – that more investors would bark than bite. It sets a bad precedent. The 49% were right.
Provident boss won’t be shown door over doorstep fiasco
There is serious money to be made by lending at very high rates of interest to “non-standard” borrowers, as the euphemism has it. Just ask Peter Crook, chief executive of Provident Financial, the biggest firm in this line of business. He’s earned a whisker under £30m over the past five years.
Shareholders have also done well during his decade at the helm, despite the one-third plunge in the share price from its peak. That is why Provident’s debacle on the doorsteps – a botched switch from part-time agents to full-time employees – probably won’t cost Crook his job. One suspects Neil Woodford’s fund and Invesco, long-standing investors with 19% stakes each, will be loyal. The £40m impairment charge hasn’t got worse since last month’s profits warning and the non-doorstep divisions, including the big Vanquis credit card operation, appear unaffected.
Even supportive investors, however, should be irritated by the company’s inability to explain why it didn’t have a decent back-up plan when many of its 4,500 part-time agents chose to hop off to rivals rather than go full-time at Provident.
Instead, Crook repeated his line that strategic rationale for new doorstep operating model remains “compelling”. Maybe it is, but chief executives are paid the big bucks to execute a strategy cleanly. Telling us that divisional chief Mark Stevens has “left the business” doesn’t explain what the bosses were doing to guard against a £40m mess.
