Review - Rapaport "State of the Diamond Industry" JCK 2008

[diagem]

Date: 6/23/2008 5:12:10 PM
Author: John Pollard

Date: 6/19/2008 3:27:55 PM
Author: Clark McEwen

Date: 6/18/2008 1:27:02 PM
Author: John Pollard
On the original topic:


Whitehall Considers Bankruptcy Protection

http://www.jckonline.com/article/CA6570946.html?nid=2054&source=title&rid=1997254392

The following is a piece that I wrote a while back for my monthly column in ADL magazine and gives my perspective on what has and is happening far too regularly in our trade.....


Once bitten, twice shy...

I thought that I had seen it all but I was wrong. Earlier this week I received a copy of a letter that was sent out to the “unfortunate” suppliers of a major retail chain that has recently declared bankruptcy. The letter started off in the typical manor for such letters by stating that the company had entered Chapter 11 bankruptcy and because of this all outstanding invoices would be considered null and void and therefore “regrettably” would not be paid. The letter went on to say that not only would the company not be paying for product that had been received and invoiced for it also would not be returning any of the goods that it had in it’s possession.
You may ask what is so unique about this as these things happen from time to time. But what came next was mind-boggling!
After informing their loyal, faithful and trusting suppliers that their invoices would not be paid, their goods would not be returned and by the way that included goods that had been sent to them on memo … the company had the unmitigated audacity to make the following statement…”However we have good news to announce”.
What is this good news you ask?
Was it that the management team had been replaced and a new team was working towards meeting their predecessor’s obligations or maybe it was that the management team had been replaced and the company would be paying cash until it could re-establish it’s credit and ultimately the trust of the suppliers … guess again!
The good news was the fact that the company would be adding more stores which would mean a “great opportunity” to its suppliers as the business expanded into many new locations. To further add to the ludicrous nature of the letter, the company states that it is preparing to order new product for the upcoming season and it would hope that the same terms, co-op and other support that was so generously offered by its suppliers in the past would still apply to the new orders.
And if that wasn’t enough the letter was signed by the head of the Jewelry Buying Division that I would surmise placed and or approved the previous unpaid orders.
Is it just me or is there something desperately and fundamentally wrong with this picture. It will be interesting to watch and see how many suppliers will buy into this rhetoric, cut a new deal and by doing so show their support of this type of behavior or will the old adage “Once bitten, twice shy” apply here.

And...Whitehall files today.
http://www.jckonline.com/article/CA6572623.html?desc=topstory

It appears that they''re defaulting on credit agreements >$100m outstanding with their banks. Fabrikant

and Rosy Blue among those bitten.

...and then fabrikant bites on....

The domino effect starts...

 

[John P]

Date: 6/23/2008 5:55:54 PM
Author: DiaGem

Date: 6/23/2008 5:12:10 PM
Author: John Pollard

And...Whitehall files today.
http://www.jckonline.com/article/CA6572623.html?desc=topstory

It appears that they're defaulting on credit agreements >$100m outstanding with their banks. Fabrikant

and Rosy Blue among those bitten.

...and then fabrikant bites on....

The domino effect starts...

Ben Janowsky predicted it. It's not over. When banks realize credit levels are too high as a result of supply-driven financing some companies may not be renewed; cut off in favor of other models. Interestingly the internet model, with high turnover on short margin and national or global reach, could surface as more appealing to creditors than traditional models with high inventory and overhead (listen and you can hear the sound of gnashing teeth). The memo/credit trail is indeed like lines of dominos... Where was Lord Polonius when we needed him?